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How Home Warranty Works

People use a home warranty most times in the place of home insurance. Indeed, both terms are easily interchangeable. However, one needs to understand how home warranty works to get a clear view of the differences in both words.

How Home Warranty Works

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In this post, you’ll get comprehensive information on how home warranty works. At the end of this post, you should be able to tell whether your home needs a home warranty service. Therefore, ensure you read to the end so you won’t miss details.

What is a Home Warranty, and How Does it Work?

A home warranty is not home insurance. Home insurance protects against extreme risks such as fires, hail, property crimes, and some types of water damage. These risks could put the entire structure or the homeowner’s items in jeopardy.

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A house warranty is a contract between a homeowner and a home warranty provider, providing subsidized repair and replacement services.  It covers significant home systems like the furnace, HVAC, plumbing, and electrical systems. A house warranty may also cover major appliances like washers and dryers, refrigerators, and swimming pools.

Homeowners insurance typically does not cover these products. The cost of fixing them, on the other hand, would be inadequate to pay the policy’s deductible.

Most policies have a fundamental component that ensures that all homeowners who purchase insurance are covered. Homeowners can buy one or more optional parts that provide additional coverage at an additional cost.

Home warranty businesses have agreements in place with well-known service providers. When an item covered by a home warranty fails, the homeowner contacts the warranty provider. The provider then sends one of its service specialists to evaluate the problem. 

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The specialist will do the job if the warranty covers the needed repair or replacement. In addition to the money previously spent on the warranty, the homeowner only has to pay a small service fee.

Do I Qualify for a Home Warranty?

Home warranty providers may decline coverage for various reasons. They might deny the claim if there was known damage before the warranty coverage commenced. 

As a result, if a pre-purchase home inspection reveals damage to particular systems or appliances, take immediate action. You should ask the seller to repair or replace the item before finalizing the deal. 

Furthermore, a warranty provider will not cover household components that you don’t properly maintain, install, or treat.

Homebuilders, sellers, and homeowners can all acquire a home warranty. Some home builders offer ten-year structural warranty policies covering floors, walls, roofs, framing, sheetrock, and other materials. Home appliances may be protected for six months, while electrical and plumbing systems may be covered for two years. 

A homebuilder warranty is usually a part of the cost of a new house. The seller or broker may pay for the warranty to attract a buyer to purchase an older home. 

Home warranties often cover repairs to household systems and appliances for a year. After a year, the homeowner has the option to renew the contract.

How Much Does Home Warranty Cost?

A yearly home warranty costs several hundred dollars and must be purchased in advance (or in installments). The plan’s cost depends on the property type—single-family detached, condo, townhouse, or duplex. It also depends on whether the homeowner chooses a primary or extended plan.

Unless the house is relatively new, the price of a residence does not change with age. The square footage of the home doesnt influence the pricing. The company usually removes separate constructions from standard policies, but they might add them for a fee. Garages, on the other hand, should be included in every warranty.

A warranty holder may get charged a service call fee (or a trade call fee) of $60 to $100. This happens every time the warranty holder requests a service provider to come over to examine a problem. If many contractors are required (e.g., a plumber and electrician), the homeowner may be accountable for each service price.

A home warranty does not ensure that the homeowner will never be responsible for home repairs. The company will exclude some issues because the homeowner did not purchase coverage for that item. 

Furthermore, even if the warranty company denies a claim, the homeowner is still liable for the service and repair costs.

Advantages of a Home Warranty

A home warranty, like other warranties, is to shield you from expensive, unexpected repair costs and offer peace of mind. It might serve as a safety net for homeowners who don’t have an emergency fund.

Those who don’t want to waste time looking for a contractor should consider a home warranty when they have an issue. For individuals who have high expectations for their equipment, warranties make sense.

During the sale and purchase of a home, home warranties commonly come up. 

In one case, a buyer might be unsure how well the house’s components have gotten maintenance. If it’s new construction, they might be uncertain how well the house was built. In either case, a home warranty can provide peace of mind. 

People who spend much on a home and wish to avoid significant additional fees may benefit from a warranty. Offering a paid-up, one-year house warranty with the purchase may provide some protection for home sellers against buyer complaints. Nevertheless, a home warranty doesn’t absolve the seller of their legal need to disclose any known defects in the property.

Disadvantages of Home Warranty

One of the most significant disadvantages of a home warranty is that it excludes items you have not adequately maintained. What constitutes routine maintenance is a bit of a gray area. In fact, it’s the source of many disagreements between home warranty providers and their clients.

Shady warranty providers might, in the worst-case situation, use the faulty maintenance clause to deny legitimate claims. Another scenario is that the homeowner and the contractor visiting have different ideas about what constitutes necessary maintenance. Alas, the homeowner receives nothing in exchange for their premium during these years (except perhaps peace of mind). 

If you had put that money into an emergency fund, it would have at least gained interest. Furthermore, a homeowner whose company denies a warranty will likely feel that he squandered the premium and service call money.

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