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How To Buy a Home Warranty
By Chris Ozarowski MONEY RESEARCH COLLECTIVE
If you’ve recently purchased a home, you may be wondering whether you should buy a home warranty plan to protect yourself from the cost of unexpected repairs. Why buy a home warranty? A home warranty can save homeowners a significant amount of money when a major appliance or home system breaks. To learn more about how to buy a home warranty, see our six tips below.
6 tips to help you buy a home warranty
A home warranty can be a comforting layer of protection for homeowners who are worried about the price of possible repairs. When you purchase a house, a transferable home warranty is sometimes included as part of the sale agreement. In that case, if you’re satisfied with the home warranty you received when you bought your home, you can simply renew the contract when the time comes. However, if you don’t have a current home warranty or want to change your provider, you can follow our guide below to choosing a home warranty plan that’s perfect for you.
1. Read reviews of warranty companies
There are many home warranty companies, and some may be a better fit for you than others. There have been cases of less-reputable home warranty companies being sued by attorney generals’ offices for misleading advertising or improperly denying claims. Therefore, if you want to buy home warranty insurance, it’s important to read reviews to get a better idea of how the home warranty company you’re considering treats its customers.
You can also look at the company’s rating on the Better Business Bureau website and see whether it has a history of unanswered complaints there.
2. Consider the type of coverage you need
There are a number of types of home warranty coverages. There are plans for major home systems such as plumbing or electrical, as well as plans for appliances like washing machines or refrigerators. Combination plans, sometimes called extended coverage or total protection plans, cover both home systems and appliances. Not every plan will fit your needs, but warranty providers often have add-ons that cover things not usually covered by their home warranty plans–like pools, for example.
Major home systems
A major home systems plan may include coverage for the following:
- Air conditioning
- Heating system
- Water heater
- Electrical system
- Plumbing system
- Ductwork
Major appliances
Major appliance coverage plans vary among providers but usually cover between six and 10 of the main appliances you use on a day-to-day basis. A sample major appliance plan may cover the following:
- Clothes dryer
- Washing machine
- Kitchen refrigerator
- Oven
- Range
- Dishwasher
- Garbage disposal
- Garage door opener
Add-ons
Common add-ons for home warranty plans may include coverage for items like:
- Pools and spas
- Sump pumps
- Well pumps
- Central vacuums
- Septic system pumping
- Stand-alone freezers
- In-fridge ice makers
- Freestanding ice makers
- Second refrigerators
- Wine coolers and fridges
- Limited roof leaks
- Lighting fixtures
- Replacing keys
- Gutter cleaning
- Pest control
- Carpet cleaning
- Water softeners
- Lawn sprinkler systems
- Electronics
- Swamp coolers
- Ejector pumps
- Trash compactors
- Saltwater pools
- Generators
- Plumbing fixtures
- Grinder pumps
- Water dispenser water lines
- Instant hot water dispensers
- Reverse osmosis water filter systems
- Professional-grade refrigerators
- Professional-grade ranges, ovens and cooktops
- Professional-grade dishwasher
- Professional-grade microwaves
- Professional-grade washing machines
- Professional-grade clothes dryers
- Window cleaning
3. Set a budget for monthly payments and annual costs
Before choosing a home appliance plan, decide how much you’re willing to spend. Home warranty providers may offer the option of either monthly or annual premiums. Annual premiums may come at a discount. According to America’s First Choice Home Club, the average annual plan is often $100 to $200 cheaper than a plan paid monthly.
A typical annual home warranty plan may cost you between $300 and $600. A monthly plan would usually cost between $25 and $50. Premiums are calculated based on the location, type and size of your home. Homes larger than 5,000 square feet may cost around $100 to $200 more to cover than smaller homes.
In addition to premiums, homeowners have to pay the home warranty company a service fee every time they request a repair. When signing up for a home warranty, customers can choose whether they would like to pay higher or lower service call fees. With more expensive service call fees, monthly or annual premiums are usually cheaper.
4. Read the fine print of your warranty contracts
Reading the fine print of your home warranty provider’s service contracts is one of the most important parts of buying or using a home warranty. Even if an appliance or home system is covered by your home warranty, your provider may specify certain components or situations that are not covered.
Home warranty companies only cover damage from normal aging and wear and tear. If the company believes that the damage came from improper use, it will deny claims. Damage from improper installation or lack of maintenance is also not covered by warranty providers.
Home warranty companies may specify parts or repairs of covered systems that aren’t covered. For example, the advanced electronic components of an appliance like a washing machine or smart fridge may not be covered by the home warranty plan.
Preexisting conditions are usually not covered by a home warranty policy. If an appliance or home system was damaged before you moved in and purchased your home warranty plan, the appliance or home system will not be covered even if you were unaware of the damage beforehand.
Most home warranty companies don’t require you to get a home inspection before signing up. While this means that signing up for a home warranty plan is easier, it also means that you may not be aware of preexisting conditions in your house before you purchase a plan. There are some home warranty companies that do cover preexisting conditions if a home inspection was done sometime before the signing of the home warranty service contract and nothing was found to be damaged at that time. If you’re worried that the previous owner of the property may not have maintained or may have neglected home systems or appliances, it may be a good idea to get a home inspection and look into a home warranty plan that covers preexisting conditions under those limited circumstances.
A home warranty service agreement will specify whether you’re able to choose your own contractors. Most home warranty companies have their own pool of licensed contractors they send out to do repairs and don’t allow you to pick your own. Some providers may allow you to choose your own contractor but will require you to submit them for approval before they do any repairs. Any repairs done without the home warranty provider’s approval will not be covered.
Make sure to read the fine print of your warranty contracts carefully before signing them to avoid unpleasant surprises in the future.
5. Understand the coverage limits
Home warranty providers usually specify coverage limits in their service contracts. These limits may be annual. For example, a home warranty company may stipulate that it will not spend more than $15,000 on repairs or replacements every year. Limits may also apply on a per-item or situation basis. A home warranty provider may state that it will not spend more than $2,000 annually for repairs of electrical wiring damaged by rust or that it will not spend more than $500 replacing a toilet system.
It’s important to understand your policy’s coverage limits because if you exceed a limit, you will be liable for the remainder of the repair costs. For example, if your home warranty provider’s coverage limit for an appliance is $1,000 and the repair cost is $1,500, then you’ll have to pay the remaining $500 out of pocket – plus the service fee.
It’s also important to remember that you will have to pay a service fee every time you request a repair, even if you have passed your coverage limits. If the warranty provider denies the claim or the contractor is unable to access your property for some reason, that service fee is non-refundable.
6. Speak with current homeowners for advice
When researching how to buy home warranty services for your house and location, it’s a good idea to talk with other homeowners in your neighborhood about their experiences with local home warranty companies. Ask around and see if any of them have had good or bad experiences with a local provider and if they have any recommendations. Having conversations with your neighbors about their home warranty experiences can help you avoid common pitfalls and make the best possible purchase decision for your situation.
When to buy a home warranty
When can you buy a home warranty? You can buy a home warranty plan as part of the purchase of a new home or at any time afterward. Buyers can ask their real estate agent to request that the seller include a home warranty as part of the sale agreement. This usually gives new home buyers a year of free warranty coverage and peace of mind in case systems or appliances left by the previous owner break after you’ve purchased the home but before you move in.
1. During the purchasing process for a house
Buying a home warranty during the home purchasing process may be a good idea. Your home warranty policy partially protects you from large potential expenses in the first year after closing. A good home warranty plan can save you thousands of dollars in repairs if some of the home’s systems or appliances fail because of old age.
If you’re considering buying a house in the near future, then it’s good to know that home warranty plans bought as part of the home purchasing process are usually cheaper than plans bought after the fact.
2. After moving into a new home
If you’ve moved into a new home and don’t currently have a home warranty, it may still be a good idea to purchase one. Unexpected repair costs can wreak havoc on budgets and cause lots of unnecessary stress. With a home warranty, you’ll have a better idea of what your monthly and annual costs will be for household breakdowns and malfunctions.
If you have a home warranty that was purchased by the previous owner of your home and you’re unsatisfied with the service, you can switch to a provider that will better suit you. However, be aware that some providers may have a 30-day waiting period after you sign the contract before coverage comes into effect. If you’re planning on switching warranty providers, make sure to time the switch so that your home is always covered throughout the process.
When is the best time to buy a home warranty? Our advice is that it’s usually better to get one during the home-buying process. This means that your home is covered right from the start – and you may even get a year of coverage paid for by the home’s previous owner.
Who can buy a home warranty?
If you’re wondering if you can buy a home warranty as a renter, the answer is, unfortunately, no. Only current homeowners are able to buy home warranty policies. Home warranties are available for the owners of houses, condos, apartments and mobile homes. For more details, contact the home warranty provider in question.
Provide yourself with financial protection with a home warranty
A good home warranty plan can be a great way to protect yourself from potential costs and increase your peace of mind. Not all home warranty providers are equal, and some may be a better fit for your situation than others. When you’re comparing home warranty plans, consider what your needs are. Would you prefer a plan with low service fees? Is a custom plan important to you?
If you’re looking to buy a home warranty online and would like to see how the top warranty providers in the U.S. compare on these and other factors, take a look at our list of the best home warranty companies in 2022.
