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Individuals spend hundreds of thousands of dollars on a new home, on average, and the prices keep rising. When spending that amount of money, a person wants to protect their investment, and a home warranty serves as one way to do so. What is a home warranty, and how does it work?
What is a Home Warranty?
A home warranty company protects the residence against disasters not covered by a conventional insurance policy. In actuality, a home warranty through 2-10.com functions as a service contract. Under the terms of this contract, the warranty provider pays the cost of repairs or replacements for covered items. However, does it actually do this?
Home Warranty Limitations
A homeowner might decide to purchase a warranty when they file a claim with their insurance company only to have it denied because the item or damage isn’t covered under the policy. However, home warranty companies also have the right to deny a claim. Many homeowners file a complaint with their local Better Business Bureau when this happens, as they didn’t receive the expected benefits. The warranty provider is right in this situation. The homeowner must know what is and is not covered by the plan.
Warranty Alternatives
Some homeowners choose to not purchase a warranty and self-insure their property. This remains a viable option, and every homeowner should set aside money for repairs and maintenance monthly. If the home warranty doesn’t cover the repair or replacement of an item, the homeowner has the funds needed to pay for the work or to replace a failed appliance or home component. This serves as a good supplement to a home warranty plan for those who want an additional layer of protection.
Purchasing a Home Warranty
Before purchasing a home warranty, individuals need to know what the plan covers. These plans come with limitations the owner must be aware of. For example, the warranties rarely cover non-mechanical items. Those items remain the responsibility of the owner.
First, learn if any items in the home already have protection. For example, items in a new home typically have both a manufacturer’s and builder’s warranty. Items in older homes may be under warranty if the owner purchased them with a credit card.
Review the cost of the warranty. This varies by provider and the plan selected. People find they can choose between several plans. Some plans cover a single appliance, certain plans cover all appliances in the home, and a comprehensive plan covers appliances along with electrical and plumbing systems. Furthermore, location plays a role in the cost of the warranty. Finally, ask about co-pays and deductibles.
Carefully read the plan to learn what is and is not covered. Consumers often don’t understand the coverage they are purchasing and become upset when they must pay for a repair or replacement when they believed the item was covered and it wasn’t. Many policies, for example, cover the refrigerator but not the ice maker. In addition, the policy typically won’t pay when an appliance sustains damage as a result of a power surge.
Additional Points to Consider
The homeowner remains responsible for maintaining all appliances and systems in the residence. A failure to do so or improper installation of an appliance or system could lead to the warranty being declared null and void with regard to that appliance or system. Pre-existing conditions could also lead to the denial of a claim.
When an item cannot be repaired, the warranty pays for a replacement. Review the plan to see if it covers the cost of a new appliance or if the provider pays the depreciated value. If the plan covers the depreciated value, the homeowner must pay the difference between the depreciated value and the cost of the new appliance.
Finally, ask about limits on payouts. A warranty provider puts a limit on how much it will pay in a certain period to diagnose, repair, and replace appliances and systems in a home. The warranty purchaser must be aware of this before choosing a plan.
Homeowners find warranties are beneficial when they understand what they are purchasing. Problems arise when the homeowner believes an item should be covered and it is not. If you have questions about a home warranty, don’t buy it until you have these questions answered. By doing so, you’ll probably find you are happy with the coverage you receive, as it pays for the repairs you expect it to.
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