What is a Home Warranty?

In honor of National Home Warranty Day on February 10, we decided to dig into the topic of home warranties. Maybe it's only something you've come across in your junk mail telling you that your nonexistent home warranty is about to expire. Today, we'll run through the pros and cons of home warranties so you can make an informed choice.

What is a home warranty?

As defined by Investopedia, "A home warranty is a residential service contract that helps pay for repairs or replacements of home systems and appliances for a set period, separate from homeowners' insurance. It's often most useful for older homes or uncertain appliance histories; plans commonly run a few hundred dollars per year plus a service fee, and claims are handled by a technician from the company's provider network."

What happens when something is damaged?

When your water heater breaks or your air conditioning goes out, you'll contact your home warranty company. The home warranty company will then work with one of the providers in their network to check on your appliance or system and provide a report. The report will let the home warranty company know the extent and potential cause of the damage. Your home warranty company will check on whether your coverage covers what went wrong. If your claim is approved, the home warranty company calls the provider to fix the issue, whether through a repair or replacement.

What do home warranty plans cover?

In general, home warranty plans cover major appliances like stoves, water heaters, and refrigerators. Sometimes HVAC systems, plumbing, and electrical systems are also included. Companies may have multiple tiers of coverage plans or allow you to purchase additional coverage, such as for garage doors or pools, and some may not offer coverage for those items at all.

Home warranty plans do look similar to home insurance plans because they do have premiums, claims, liabilities, and deductibles. The difference, however, is in the services that each offer: Home warranties protect the home's systems, while home insurance covers damage to the home itself due to things like natural disasters.

Are home warranties worth it?

The short answer is that it depends. If you buy your home and don't know how well the previous owner maintained their home or don't have information related to the replacement or age of the house's appliances or systems, a home warranty could help. You may also want to offset the high costs of replacing an appliance all at once by paying the monthly premium on your home warranty plan instead.

The downside to a home warranty plan is that you'll often have to wait for repairs, which means you'll likely have at least a few days without a functioning water heater, air conditioning, or fridge. There is back-and-forth between your repair person and the insurance company before the replacement or repair can get approved, and they may only pay for so much, depending on the age of the system.

While we can't recommend whether you should get a home warranty plan, we're here to help with your repairs. Give us a call at (815) 780-7884 or view our list of services.