You just bought the home of your dreams. Or maybe you’ve been living in your home for years. In either case, you’ll likely face the frustration and cost of repairing or replacing a failed kitchen appliance or major system, like an A/C or heating unit.
If you’re about to buy a house, a failed appliance or major system can be particularly frustrating. Imagine you’ve just spent tens or hundreds of thousands of dollars only to find out you’ll need to spend thousands more and deal with a broken appliance in the middle of unpacking!
Don’t worry though, you’re covered because you have home insurance….right?
A Home Warranty is NOT Insurance
The first thing to know is that a home warranty is separate from home insurance. Home insurance covers damage or loss to your house or your belongings due to a covered loss such as fire, theft, and other external events. Home insurance is a requirement.
A home warranty, on the other hand, is an optional service contract that can be purchased at any time you’re in the house. Warranties cover the repair or replacement of covered appliances and major systems, such as kitchen appliance, electrical, plumbing, and heating and air conditioning systems that fail due to normal wear and tear. A home warranty lasts for 12 months but can be extended at additional cost.
For a one-time payment, a home warranty could save you potentially thousands of dollars if one of your major covered appliances or systems fail. For example, the cost of a new A/C unit alone is at least several thousands of dollars. Then you still need to add in the cost of installation.
In order to purchase a warranty, your appliances have to be in good-working order. Buying a home warranty, however, does not mean you can ignore maintaining your appliances afterwards. It is not a get-out-of-routine-maintenance pass. If you cannot demonstrate that you conducted reasonable, routine maintenance on your appliances or systems, your warranty will not cover that appliance when it fails.
How Much Does a Home Warranty Cost?
The cost of a home warranty will vary based on several factors, including the part of the country your house is located, the type of plan, the provider, and the home size and type.
For example, in central Ohio, a plan that covers most major appliances costs around $500 a year. A plan in the same area that covers major appliances plus electrical and plumbing costs around $600 a year. By contrast, similar plans in Westchester, N.Y. might cost $900 and $1020, respectively.
Your type of plan also impacts the price. Just as you would expect, a plan that covers individual appliances is going to be less expensive than a plan that covers all your appliances, which is going to cost less than a plan that covers all of your appliances plus electrical and plumbing.
There may also be additional co-payment costs to consider. Some plans charge a co-payment of $60-$125 that is paid to the contractor at the time of service, even for work that’s covered under the warranty.
A Home Warranty Sounds Good, But is it the Right Purchase for Me?
There are several ways to look at whether a home warranty makes sense for you. If you’re purchasing a newly built home you likely don’t need to purchase a home warranty, at least not right away. The appliances, building materials, and craftsmanship are often already covered under warranties by the appliance manufacturer and the builder. These can last a year or more. The duration of this coverage might differ depending on the maker of your appliances and the builder, so you will want to get those details. Also, if you purchased new appliances with a credit card, your credit card company may automatically extend the manufacturer’s warranty. Remember that you can purchase a home warranty at any time while living in your home as long as everything is still in good working order at the time you purchase the warranty.
If you have the resources to cover the cost of repair or replacement, then maybe you don’t need to spend “extra” on a home warranty. However, the failure of just one major appliance or system can easily amount to more than the cost of a warranty. In such cases, the decision comes down to your level of comfort with the condition of the appliances or systems and how you make financial decisions.
There are situations where a warranty makes the most sense. If you’re purchasing a house with older appliances and utilities, buying a warranty might be the right move. Alternatively, if you’ve been living in your home for a while and the appliances and systems are in working order but are approaching their lifespan, a warranty might be a good option. Big-ticket items have the following lifespans: water heaters 10-15 years, A/C and furnaces 10-15 years, and refrigerators 10-18 years. Regardless of the age of the appliance or major system, as long as it is in good working order, you can purchase a warranty on them.
There are convenience factors too. Your home warranty provider will connect you to a reputable repair company, so you don’t have to spend time searching for one. You’ll also have confidence that whoever shows up to your home is qualified for the job and ultimately accountable to the warranty provider. For those of you who are not mechanically inclined, the protection of a home warranty is added convenience.
Choosing the Right Provider and Plan
There are many home warranty providers to choose from, but how do you find the best one for you? You’ll want to begin by researching the companies and their plans. You’ll want to pay close attention to the terms of each policy, including what is and is not covered, exclusions and limitations on coverage, and co-payments for claims. Be aware, there’s going to be a lot of information and fine print to absorb. On top of that, you want to make sure the company you choose is reputable. There are tons of online reviews for these companies, but the reviews are not always accurate or representative of the experience you will have. In this respect, the Better Business Bureau is a great source for informing your decision.
If all this research sounds daunting, American Heritage Insurance Group can help. We make this process easy because we partner with the leading provider of home warranty plans in the U.S., American Home Shield. American Home Shield, or AHS, offers flexible plans to match your needs and budget, whether you want to cover just a few appliances or major systems, everything possible, or tailor a combination of coverage that fits your unique situation. AHS’s network of service contractors consists of over 14,000 professionals and it accepts service requests online or by phone 24/7/365. No matter the time or day, you’re covered.
Whether you’re buying a new house or you’ve been living in your house for years, a home warranty could bring you the comfort of knowing you’re protected against the cost and frustration of a failed kitchen appliance or major system.
Call American Heritage Insurance Group to discuss whether a home warranty is right for you and how a warrant from AHS can add peace of mind to your home.
Article By: Tony diFrancesca
Sources: American Home Shield