What are the benefits of home warranty plans?

When you buy a new home, regardless of whether it is new or old, you will most likely be going to be offered a home warranty by either the seller or the real estate agency you are purchasing it through. A home warranty is basically a safety net against any unforeseen and potentially very expensive repairs. There are numerous benefits of home warranty plans but there are also potential drawbacks. In this article, brought to you by Consumer Opinion Guide, we are going to explore all the benefits and point out a few drawbacks. Once you finished reading, you will have all the information you may require to make a good decision.

What is included in the home warranty?

First off, you need to understand that there is a large difference between homeowners insurance and a home warranty. The former covers incidents such as property crimes, fires, certain natural disasters as well as specific types of water damage. Whereas the home warranty is a contract between the homeowner and the company that provides the warranty. The deal offers the homeowner with reduced repair costs on all of the home’s major components. These include the furnace, plumbing, electrical systems, as well as HVAC and major appliances such as the dishwasher and refrigerator. It even goes as far as including coverage for swimming pools.

a swimming pool
Most home warranties cover swimming pools.

Homeowners’ insurance, on the other hand, does not cover any of these expenses. Or if it does, the repair cost usually does not meet the policy’s deductible limit. Most home warranties have one basic component that provides certain coverage, with the option to purchase additional components. Of course, this does come with an increased cost and might not be ideal for some homeowners.

The way it all works is that home warranty companies have special agreements with home repair service providers. When an item that is covered by the home warranty requires repairs, the company sends one of the service providers to rectify the problem. Of course, the homeowner first needs to notify the home warranty company in the first place.

There are additional costs aside from the home warranty price, but it is usually only a small service fee. If your home has a lot of items that require repairs, and are covered by the warranty, it has the potential to save you thousands of dollars.

How much does a home warranty cost?

The initial price of home warranties is usually around several hundred dollars a year, paid either in-front or in installments. The specific details vary from company to company but those are the averages. Furthermore, the price also depends on the type of property. A warranty for a single-family detached home is going to be cheaper than that of a large duplex. And it also depends on whether the homeowner decided on a basic or an extended plan.

Things that do not influence home warranty price

What the home warranty does not depend on, usually, is the age of the property. This is another one of the benefits of a home warranty. That is, unless your new home is brand new, which will reduce the price of the warranty by a significant margin. The square footage is also not a factor in determining the home warranty price unless it is over 5,000 square feet. Another thing to note is that if your home has separate structures, such as a guest house, they are usually not included in the basic policy. They can, however, be included with an additional fee. The only exception is the garage, which is usually included in even the basic home warranty plan.

Service requests

The annual premium you pay for a home warranty also increases with any subsequent service requests. It usually increases around $60-100 every time that someone has to come over and repair your stuff. Lastly, if your issue requires multiple service providers (calling both a plumber and an electrician at the same time, for example) you are going to need to pay a service fee for each one.

A home warranty does not mean that you will not need to pay a dime on home repairs once you acquire it. There are home issues that a warranty will simply not cover, and it does not apply to any items that you do not maintain properly. And there is still the possibility that the home warranty company simply denies your claim, leaving you to pay for both the repairs and the service fees.

You will also have small, out-of-pocket, expenses for service requests.

That being said, the benefits of a home warranty usually outweigh the drawbacks. It is in your best interest to purchase a home warranty plan, most of the time. Let’s take a look at why this might be the case.

Benefits of home warranty

A home warranty, like all other warranties, serves to provide peace of mind and to protect homeowners from expensive repair bills. If you don’t happen to have an emergency fund, or if you want to save it for something else, the warranty will act as your buffer. Here are the main advantages that a home warranty offers:

  • Budget protection
  • Easier to anticipate out-of-pocket expenses
  • Added protection
  • Better time management
  • Extra savings opportunities

Most of the time, when you purchase a house, you don’t really have a good idea of how well it was maintained before you purchased it. Or how it was built in the first place. That is where a home warranty “kicks in”. It protects you from any major expenses that may arise after the sale process is over. The seller is required by law to disclose any known problems and in an ideal world, you would have all the information to decide whether you need a home warranty or not readily available. But, as that is quite often not the case, a home warranty can provide you with a safety net.

Now, let’s take a look at the benefits of a home warranty in a bit more detail.

Budget protection

wallet under magnifying glass
A home warranty protects your budget.

By purchasing a home warranty, you are basically protecting your budget. The fact that the warranty covers most of the home’s major appliances and systems means that you don’t have to worry about any expensive repairs.

As you are very well aware, home repairs can quickly become quite expensive, requiring you to “shell out” thousands of dollars for them. While you will still need to pay some out-of-pocket money for the service fee, your home warranty company will cover most of the costs. This, in turn, may save you a lot of money when you may need it the most. You can, of course, opt to take the gamble and pay for all the repairs from your own pocket. But we recommend that you purchase a home warranty for at least a period of one year. That is where most of the problems will “pop up”, so to speak.

Out-of-pocket expenses are easier to anticipate

Another one of the benefits of home warranty is that it can help you anticipate out-of-pocket expenses. You will not need to guess how much system breakdowns might cost during the year, you will know exactly how much you will need to pay for each individual issue. This can greatly help you plan your yearly household budget and minimize unforeseen expenses.

  • Here’s an example: American Home Shield Home Warranty┬« provides homeowners with the option of paying for your warranty in one lump sum, or via monthly payments. The warranty also provides homeowners with exact prices of Trade Service Call Fees (TSFs). TSFs occur whenever a contractor arrives at your doorstep to diagnose the problem or perform repairs. Furthermore, this specific home warranty offers the homeowners the option to choose the amount of the specific TSF at signing up. This provides even more financial control to the warranty holder. Normally, the higher the TSF you pay, the lower the premium you need to pay is is, and vice versa. Not only will the home warranty protect your budget, but it can also help you predict it, as well.

You get added protection

As we mentioned previously, a home warranty is not the same as a homeowner’s insurance. But they do complement one another. Items that homeowner’s insurance does not cover, the home warranty does. This, in turn, provides homeowners with additional protection, as between the two, the coverage is almost complete. Of course, there are components to each policy, and you can reduce the coverage or increase it, depending on your needs.

A home warranty offers better time management

old watch in sand
Time management is very important. A home warranty makes it easier.

As some people might say, “Time is money!“. A home warranty can save you quite a bit of time by providing you with reliable service providers almost immediately. By having a home warranty, you always know who to call for just about any home issue. Otherwise, you may need to scramble and find a service provider at an inopportune moment. Going back to the AHS as an example, this warranty accepts service requests 24/7, either online or by phone.

The most important factor is that you can easily connect to service contractors that have experience in dealing with the exact problem type that you have. This has the potential to save you a lot of time and a lot of nerves.

And provides extra savings opportunities

The last one of the important benefits of home warranty is the fact that it can offer extra savings opportunities. An example of this is the AHS Appliance Discount Program, where customers get exclusive discounts on quality brand appliances. For example, air conditioning and furnace filters can receive as much as a 50% discount. This has the potential for large savings, depending on the brand, type, and price of your appliances. Most home warranty companies offer similar deals, and it is in your best interest to “shop around” before settling on the right warranty for your home.

In addition to this, the warranty holders may receive all sorts of helpful home management information from the warranty provider, meaning that they can run their homes much more efficiently. The home warranty plans are also quite customizable, offering you the chance to pay for exactly what you need and nothing else.

Choosing the best home warranty plan

doors, representing choices
Not all home warranty companies are the same.

To be able to choose between home warranty plans, you need to understand the three basic types first.

  • Coverage for one particular appliance (e.g. refrigerator)
  • Coverage for multiple appliances
  • Major systems and all appliances coverage

With this in mind, you need to understand that very few home warranty plans, even the most expensive ones, will cover every single appliance and system in your home. For example, if you have a second refrigerator in your garage, chances are that the warranty will not cover it. Unless you negotiate with the company about it, of course. Most home warranty companies are quite specific in what they do and do not cover. When purchasing a plan, you will do well to read the entire contract very thoroughly. There’s also the option of negotiating the price and coverage. Most companies will be open to some form of negotiation and extend the benefits of home warranty even further.

Home warranty FAQ

Is the home warranty redundant?

If you are purchasing a newly-constructed home, you may not need additional coverage. Most of the time, the home builders will include warranties of their own.

Does my home need an inspection before purchasing a warranty?

This varies from company to company, but in general terms – yes. Some companies might not require any maintenance records or a home inspection, but most will.

How long does it take until repair?

This depends on the actual problem. But, for example, if your HVAC goes out, you will most likely not need to wait long. Most home warranty companies offer 24/7 customer service, and they send contractors out almost immediately. But this is something that you need to talk about with your home warranty company, as the contractor response time might vary.

Will there be additional fees for recurring issues?

Normally, every time a contractor arrives to fix an issue, you will need to pay a service fee. However, if the problem is recurring, you will not need to pay any additional fees, most of the time. Make sure to verify this with your home warranty provider, though. This is one of the most important of the benefits of home warranty, after all. You need to make sure that you don’t incur additional fees for recurring problems.

If you are looking for even more information about home warranties and the best companies that offer them, explore Consumer Opinion Guide and discover everything you want to know! Our selection of top home warranty companies will provide you with the best value for your money.

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