What Is Included in a Home Warranty?
A residential home warranty is also known as a service contract. It is a contractual agreement between homeowner and insurance provider. When a covered system or appliance fails or malfunctions in the home, that item is either repaired or replaced. Home warranty companies usually offer choices of plans. Plans often provide a varying balance between cost of plan, cost of service call and number and value of systems and appliances covered.
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Coverage Typically Included
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A standard home warranty typically provides coverage for household systems and appliances. Covered systems often include air conditioning and heating, electrical and plumbing. Appliances likely to be included are water heaters, garbage disposals, dishwashers, built-in microwaves, stand-alone ovens and cook tops or stoves. Some home warranty plans also include refrigerators, washers and dryers. Others consider those appliances extras that can be included in optional coverage.
Contract Terms
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Coverage is usually paid on an annual basis with a typical premium in the neighborhood of $375 to $425. Plans also typically charge for each service call, and the payment required by the policyholder to the service technician may be around $50, $60 or as much as $100. The terms of the warranty usually state that the homeowner is responsible for maintaining systems and appliances and that at the start of the contract they must be in good working order. In other words, normal wear is appropriate, but using appliances in a manner for which they are not intended is not. For a system or appliance to be covered, it must be reported within the effective period of the contract.
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Availability of Upgrades
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The homeowner may be able to purchase optional upgraded coverage for certain items such as water softeners, faucets, shower heads, electric garage door openers, pool and/or spa systems, wine chilling systems and extra large dwellings with more than 5,000 square feet. The cost of upgrades should be weighed against the risk if the system fails. As an example, if the upgrade warranty cost of insuring a hot tub amounts to $12 per month and the hot tub investment was $5,000, the additional insurance could represent a value.
Limitations and Exclusions
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Home warranties usually have specific limitations and exclusions. A system that needs to be replaced will usually be replaced with one that is of the same size, efficiency and rating as the original, but not necessarily the same brand. You may be able to purchase a brand upgrade by paying the cost difference. Additionally, secondary damages are not usually covered. If a dishwasher fails and damages the floor, the dishwasher is likely to be covered but the floor is not. Items under manufacturer's warranty are not usually covered. The warranty is not likely to cover the cost of bringing systems to code, making new appliances connect to old fittings or providing required permits.
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References
- Photo Credit Faucet in a bathroom image by Jakub Niezabitowski from Fotolia.com
