Home warranty exclusions and coverage limits
Purchasing a home warranty contract is an excellent way to avoid paying an excessive amount of money for appliance repairs or replacements. However, many people purchase the contract without realizing the home warranty exclusions and coverage limits. Even if you purchase the best home warranty on the market, you will still need to be well aware of what is covered, what is not, and the associated limitations. Otherwise, you may find yourself in a situation where you thought you had coverage, yet you do not. In this article, we are going to go over the typical home warranty exclusions and coverage limits, as well as answer some of the most important questions associated with home warranties.
Typical home warranty exclusions
While each home warranty is unique to the provider, there are certain exclusions that are usually found within almost every home warranty contract. They include (but are not limited to):
- Hazardous materials
- Structural issues, foundations, and similar
- Incorrect installation
- Manufacturer defects
- Pre-existing conditions
- Commercial-grade equipment
- Secondary damage
Before you sign anything, it is in your best interest to carefully read the entirety of the contract. Some of the less reputable home warranty companies might include harmful clauses that you might not be aware of unless you take the time to read everything carefully. In fact, even if you are purchasing a home that already comes with a home warranty, you might want to familiarize yourself with all the exclusions, clauses, and coverage limits. One of the most common mistakes made by home buyers is that they presume that their home warranty will cover any and all repairs or replacements. While a home warranty does provide a great deal of coverage, it is usually the exclusions that “get you”.
With that in mind, let’s take a look at what is not covered under most home warranties.
Most of the time, you can expect that your home warranty will not cover any systems or appliances that contain or use hazardous or toxic materials. This is due to the fact that these materials are inherently dangerous, and any mishandling may cause considerable damage. That said, there are quite a few interactions between home warranties and hazardous materials, and some home warranties might make an exception here and there. However, unless you have it in writing, almost no home warranty will cover any damage that happens due to hazardous materials in your home.
Here are some of the most common exclusions that relate to hazardous materials:
- Gas leaks
- Carbon monoxide leaks
- Acid damage
Furthermore, your home warranty will also not cover:
- Red-tagged units
- Lead and lead-based products
Basically, if a material happens to be considered hazardous, there’s a good chance that your home warranty will not cover anything that came into contact with that material. These home warranty exclusions include all appliances that utilize the hazardous material for their functioning, as well as appliances that were influenced by the material in any way.
Structural issues, foundations, and similar
Many people believe that a home warranty covers your entire home. Unfortunately, this is not the case. A home warranty only covers appliances within your home, not the home itself. Therefore, you can expect your home warranty to refuse coverage for any structural damage to your home, including support beams, foundations, flooring, paint, and walls.
Furthermore, if any items happen to break from an overwhelming physical force, “act of nature”, or anything similar, your home warranty will not cover them either. If you want coverage for structural damage, you can find it within homeowners insurance. In fact, these are some of the most important things in homeowners insurance. In other words, to get full coverage, you will want to purchase both a home warranty and homeowners insurance.
Any time your appliances and systems break down due to incorrect installation, you will have to pay the repair/replacement cost out of your own pocket. While it may be possible to arrange for a special clause with your home warranty provider, the companies that offer coverage for incorrect installation are few and far between. Another very common mistake made by first-time home buyers is that they choose to install their appliances and systems on their own in an effort to reduce costs. While this may initially save you a bit of money, it will also void your home warranty coverage if you happen to make an installation mistake.
Even if you don’t make any installation mistakes, it is very easy for a home warranty company to say that you did. While this may not be an issue with highly reputable home warranty companies, many others will latch on to any DIY installation to avoid providing you with coverage. Furthermore, if you are installing your systems and appliances on your own, you have no one to hold accountable but yourself. If you pay for a professional installation, you can simply refer the problem to them, and they will have to pay for it. Otherwise, you may find yourself in a situation where you have to pay for repairs and possible replacements.
While manufacturer defects are not all too common, they do exist. If a system or an appliance breaks down due to a manufacturer defect, you can be certain that your home warranty will not pay for any repairs or replacements you might need. To make matters even more complicated, some appliances may have parts that were subsequently recalled from the manufacturer. As you might imagine, any such appliances also fall under home warranty exclusions.
Since going through each and every appliance and searching for a defect is not feasible, the best way to understand your coverage is to schedule a home inspection. Most home warranty companies will be able to provide you with one, and you can schedule it on your own as well. This will also allow you to figure out what your home warranty will (and will not) cover, as well as any pre-existing conditions that your appliances and systems might have.
If any appliance or system in your home has a known pre-existing condition, it will be excluded from your home warranty contract. The key word here is “known”, as it is entirely possible that some of your appliances have pre-existing conditions and are still eligible for coverage. To benefit from that coverage, you need to schedule a home inspection before purchasing a home warranty contract. If an inspection shows no signs of pre-existing conditions, your home warranty will provide you with coverage even if these conditions actually exist.
However, without a home inspection, your home warranty will not cover any unknown pre-existing conditions. In fact, many home warranty companies “use” unknown pre-existing conditions to deny coverage. That is why it is always in your best interest to schedule a home inspection prior to purchasing a home warranty. That way, you will not have to deal with any home warranty exclusions based on pre-existing conditions.
Furthermore, most home warranty companies have their own standards when it comes to coverage for pre-existing conditions. Most companies will provide you with coverage if the inspection shows that your appliance or system is in good condition within 60 days before your coverage starts. You will also get coverage if the home inspection fails to uncover any pre-existing conditions. Of course, your home warranty needs to recognize and approve your home inspector first. Try not to schedule a home inspection before confirming that your home warranty provider will actually accept it.
A home warranty will not cover any commercial-grade equipment. This includes commercial kitchen appliances such as Sub-Zero and Thermador, GE Monogram refrigerators, Viking appliances and systems, and similar.
Most of the time, secondary damage to home appliances happens due to a leak of some sort. In other words, if you want to protect your home from water damage, you can’t count on your home warranty. You will need to rely on your homeowner’s insurance instead.
Home warranty coverage limits
Every single home warranty contract has coverage limits. They differ from one company to another and are dependent on a variety of factors. For example, coverage limits for single-family homes are different than coverage limits for townhouses. The limit itself usually depends on your monthly or annual premium. In other words, the more you pay for coverage, the higher the limit is.
There are many reasons for these limits. First, the limits allow the home warranty company to set expectations, as well as make the home warranties more affordable. The fact of the matter is that home appliance repairs/replacements can get quite expensive. Basically, coverage limits and home warranty exclusions are there to protect the home warranty company from excessive bills.
The average home warranty coverage limit ranges from $1,500 to $3,000, depending on the provider. Note that these numbers are per-item repair/replacement. Some home warranty companies choose to offer coverage limits on a per-term basis. Therefore, it is quite important to fully understand the limitations before you purchase the policy. If you have numerous high-cost appliances, you may want to get a per-item policy that also has a high coverage limit. On the other hand, if your appliances do not cost more than $1,000 each, there is no need to get a policy that has a $3,000 coverage limit.
Basically, what you want to do is match the coverage limit with the average cost of your appliances. That way, you can be sure that you will never exceed the coverage limit. However, most homes have a combination of low and high-cost appliances, making this decision a bit more difficult.
What happens if you exceed the coverage limit?
This question is a bit more difficult to answer as every service request is unique. Most of the time, however, you can expect to pay the difference between the coverage limit and the actual repair/replacement cost. In other cases, the home warranty company may provide you with a buyout to address your breakdown. Some home warranty companies may simply deny you coverage for that particular item.
The best thing you can do is to discuss this topic with your home warranty provider. Before you sign the contract, make sure that you fully understand what happens if the cost of repairs or replacements exceeds the limit. Otherwise, you may find yourself in a situation where you need to pay a huge amount of money for repairs.
Can you increase the coverage limit?
Most home warranty companies will provide you with a way to increase the coverage limit. Of course, this will increase the price of the policy. However, you need to be very careful of the specifics. In most cases, a basic home coverage plan is usually the best. You also need to find out whether the limit increases on a per-item or a per-term basis.
Furthermore, you may want to see if your home warranty company allows you to increase specific limits. Most of the time, a home warranty company will offer specific plans (basic, luxury, etc.) that may not be what you are looking for. You may also be able to negotiate with your company to amend their plans.
The best way to deal with home warranty exclusions
Having your home warranty provider deny you coverage can be quite costly. The best way to ensure that this does not happen is to talk with your home warranty company at length about home warranty exclusions, limits, and any other specifics. Feel free to ask as many questions as you can think of. Always ask to have the answers in writing. Schedule a home inspection prior to purchasing a home warranty. Read the contract VERY carefully. Basically, if anything is even slightly unclear, ask your company to clarify and put it into writing. That is the only way you can be certain that you will have coverage when it really matters.
If you want to work with the best home warranty companies in the country, you can find all of them right here at the Consumer Opinion Guide! Our team of experts will help you find the company that best matches your budget and your needs!