Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Important Things To Consider When Getting A Home Warranty
Sep 14, 2022
Image: Pexels/Mikhail Nilov
When it comes to home ownership, there are a lot of things to consider to keep your home in tip-top shape. Being a homeowner can be expensive from regular maintenance and repairs to unanticipated emergencies. One way to help offset the costs of unexpected repairs is to purchase a home warranty.
A home warranty is a service contract that helps cover the costs of repairing or replacing major appliances and systems should they break down due to normal wear and tear. Home warranties are not the same as homeowners insurance, which covers damages caused by events like fires, floods, and theft.
If you're considering purchasing a home warranty, here are some important things to keep in mind.
What's Covered by a Home Warranty?
One of the most important things to consider when getting a home warranty is what exactly is covered. Most home warranties will cover major systems like heating, cooling, and plumbing, as well as appliances like your fridge, oven, dishwasher, washer, and dryer. Some home warranties will also cover things like your pool, septic tank, or well pump.
Be sure to read the fine print of your contract so you know exactly what's covered and what's not. It's also important to note that home warranties typically have a list of exclusions, so certain repairs or replacements may not be covered.
For example, many home warranties exclude pre-existing conditions or damages resulting from a lack of maintenance. So, if your fridge breaks down because you didn't clean the coils, or your AC unit stops working because you forgot to change the filter, your home warranty likely won't cover the cost of repairs or replacement.
Aside from coverage, you also have to consider the waiting period. There are home warranty companies with no waiting period, but most companies make you wait 30-60 days after your home warranty contract goes into effect before coverage begins. So, if something breaks during that waiting period, you'll have to pay out of pocket for the repairs or replacement.
What's the Cost of a Home Warranty?
The cost of a home warranty varies depending on several factors, including the size of your home, the age of your home, and what's included in your home warranty plan. Most home warranty plans start at around $350 per year but can go up to $600 or more.
Some home warranty companies also charge a service fee every time you file a claim, which is typically between $50 and $100. So, the costs can add up if you have to use your home warranty multiple times in a year.
See: 4 Smart Investments to Raise Your Home’s Value
It's also important to note that home warranties typically have a deductible, which is the amount you must pay out of pocket before coverage kicks in. Deductibles can range from $100 to $200, so be sure to factor that into your budget when considering a home warranty.
What's the Difference Between a Home Warranty and Homeowners Insurance?
It's important to understand the difference between a home warranty and homeowners insurance, as they serve two very different purposes. Homeowners insurance protects your home and belongings in the event of damage or loss due to events like fires, floods, and theft. On the other hand, home warranties help cover the costs of repairing or replacing major appliances and systems should they break down due to normal wear and tear.
In short, homeowners insurance covers damages caused by external factors beyond your control, while home warranties cover repairs and replacements needed due to normal wear and tear.
What to Look for in a Home Warranty Company
When choosing a home warranty company, it's important to research to ensure you're getting a good deal. Here are a few things to look for:
• Affordable plans: Make sure your chosen company offers plans that fit your budget.
• High-quality customer service: Read reviews to see what other customers have to say about the company's customer service. You want to ensure you're working with a company that will be responsive and helpful if you need to file a claim.
• Flexible coverage: Choose a company that offers flexible coverage so you can tailor your plan to your specific needs.
• Clear contract: Be sure to read the fine print of your contract so you understand what's covered and what's not.
Image: Pexels/Rodnae Productions
A home warranty can be a helpful way to protect your finances in the event that something goes wrong with your home's major appliances or systems. But it's important to research to ensure you're getting a good deal from a reputable company. Be sure to read the fine print of your contract so you know exactly what's covered, and look for a company that offers affordable plans and high-quality customer service.
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