If you have homeowners insurance, then you could be forgiven for wondering why you would also need a home warranty. After all, why get double protection for home?
The truth is that home warranty is different from home insurance, with the two serving completely separate functions. Homeowners insurance covers damage to your home’s structure and/or belongings, bailing you out when you are a victim of theft, vandalism, fire or various other types of disaster. Home warranty covers all the systems and appliances in your home, helping you avoid the cost of unexpected repairs and enabling you to skip the wait for a repairman. In other words, a home warranty could be called ‘systems and appliances insurance.’
The top home warranty providers generally offer a choice between a systems-only plan, an appliances-only plan, and a combination plan with all your systems and important appliances. Alternatively, some providers offer a basic combination plan with a handful of selected systems and appliances and then a premium plan with all your systems and important appliances. Often, providers will charge an additional fee for covering less-common appliances.
Covered systems typically include:
Covered appliances typically include:
Paid add-ons may include:
There are two fees to look out for when comparing home warranty providers: the annual premium and the claims service fee.
The annual premium is what you pay each year for your house warranty. You can pay on a monthly or annual basis, but it only ever makes sense to pay monthly if you’re planning to move out of your home in less than a year. The annual fee for a 12-month home warranty (or 13-month home warranty, as most home warranty companies offer in practice) ranges from cheap plans for around $300 to premium plans for around $720, depending on how many systems and appliances you need covered.
The claims service fee (also known as the minimal service fee) is the amount you pay each time a contractor visits your home for a covered repair or replacement. The fee is only charged once for a covered repair/replacement; if the contractor has to visit multiple times for the same problem, you should only be charged the minimal service fee once.
A home warranty is a contract between you and the home warranty company, and you should always read the fine print to make sure the terms and conditions suit you. Most home warranty providers show a sample contract on your website that you can read through before signing up for an annual plan.
The most important things to look for are:
While around 95% of American homeowners have home insurance, far fewer have home warranty coverage, due to the fact that individual systems and appliances are far cheaper to replace than an actual house. Nonetheless, repairing or replacing a system or appliance (particularly your HVAC, electrical or plumbing system) can cost you thousands of dollars – which is expensive enough to regret not having home warranty coverage if you experience a breakdown.
In a nutshell, if you want the peace of mind of knowing you won’t be out of pocket for broken systems or appliances, then a home warranty is for you.