Ins and Outs of Home Warranties
Brought to you by Hingham Realtor Alice Pierce serving the South Shore of Boston
Owning a home is one of the greatest joys and securities in life, but the road of home ownership can sometimes be unpredictable. When the unexpected happens, repairs and replacements can be costly and a home warranty can offer some peace of mind.
Most people learn about home warranty options when they purchase their home because they are not well understood nor widely publicized. Similar (but different) to a homeowner’s insurance policy, a warranty is a strong addition to your home protection planning.
What is a Home Warranty Exactly?
Home warranty coverage is designed so that a homeowner never has to worry about the cost of repairing or replacing appliances or mechanical systems.
Everything breaks down eventually due to normal use and age. A home warranty covers the repair or replacement of certain necessities in your home when they break down, saving you the cost of repair or replacement. It is like a multifaceted service contract intended to cover many of the appliances in your house in addition to entire systems in the event of an unexpected failure or just normal wear and tear.
You pay an annual fee and in return things specified in the contract are protected by the warranty. Should something need repair or even complete replacement, you pay a relatively small service fee and the remainder of the tab is picked up by the warranty company.
A home warranty can include protection for central air conditioning, plumbing, heating systems, dishwashers, disposals, electrical systems, stoves, washers, dryers, ice makers, garage door openers, and even water heaters. With a more customized plan you can include additional protection for ductwork, doorbells, trash compactors, ceiling fans and refrigerators.
Since warranty companies differ, the contract will cover many, but not all, of your home’s appliances and systems. Contract costs and coverage varies so always compare before purchasing your contract. Also know that your home’s systems and appliances must be in working order before the contract is entered into with the warranty company.
Make sure you have reviewed your contract and coverage before you need it to understand what is covered and what is not. When you buy a home warranty, consider premium and optional coverage to customize the plan to fit your needs.
How are Home Warranties Priced?
The home warranty is purchased on a yearly basis and the price is determined based on several variable. The first consideration is the location of your home. Each state varies when it comes to the cost of living and property regulations.
The warranty also must account for the type of home you have. For example, a two family house will impact the cost in the upwards direction because many of the appliances and systems are times two.
The square footage of your living area is another factor when the home warranty is priced.
These variables are static, but the type and amount of coverage you choose is flexible. All standard home warranty plans start at a baseline coverage and therefore leave out some things that you might want to include. Any extra items above this baseline will cost more per year.
In addition to the annual contract fee, each time you initiate a service through your contract, you pay a small fee to the warranty company.
Homeowner’s Insurance is Different Than a Home Warranty
One of the most important add ons when owning a house is a way to insure that property with a homeowner’s insurance policy. Although this policy is critical protection, it does not address appliances or systems if they should break down or fail after normal wear and tear. Should any systems or appliances become damaged due to weather, flooding, fire etc, then your homeowner’s policy will cover them.
Home insurance and home warranties are both designed to help you in the event that you experience loss or damage to your home and/or your belongings. A typical home insurance policy covers many things including the structure of your home, personal belongings, and other structures on your property if there is damage or loss.
A home warranty, on the other hand, offers repairs and replacements for the home appliances and mechanical systems covered in your contract. The easiest way to differentiate between insurance and warranties is to remember that a home warranty is a contract, not a policy.
If a tree limb falls on top of your roof causing damage, it is your standard homeowner’s policy that covers repairs to the structure of your home.
A fire starts in the kitchen while you are cooking and while the fire was quickly extinguished and managed, there is damage to the stove and the wall behind it. Your homeowner’s policy covers any damage caused by fire to the structure of your home.
In the middle of preparing Thanksgiving dinner, if your oven stops working, your home warranty will cover the necessary service to get it back in order.
In the middle of July our air conditioning will not blow cool air anymore because it is a ten year old system. Providing that the faulty mechanics are due to normal wear and tear, your home warranty contract will cover the expense of repairing or replacing the unit.
Part of the confusion regarding insurance and warranties is that they share some features yet differ in areas. The function of the agreements differ when it comes to damage. Your insurance policy covers damage to the house structure whether by fire, weather, flooding or vandalism. The insurance industry is regulated by the state and home warranties are not. Also, insurance pays to repair or replace the things that are inside of your home, and also covers various liabilities.
Another difference is that insurance requires underwriting where the cost of your policy depends on details about your home, its age, location, and construction, as well as its contents. Home warranties don’t require underwriting and everyone in the same area with the same standard warranty pays the same price.
Keep it mind that each warranty company is different and coverage options vary. Always read all of the text when you are considering different home warranty companies.
What is Covered by a Home Warranty?
Coverage varies from one home warranty to the next, so it’s crucial to read the fine print with care while shopping for a plan. There are standard, premium, customized and add on plans within most companies.
Typically a standard home warranty won’t cover things like your washer and dryer, refrigerators, hot tubs and spas, swimming pools, garage door openers or outdoor systems and components. But as mentioned before, sometimes coverage can extend to these things at an additional cost.
The age of your systems and appliances is not restricted by home warranty contracts and there is generally no inspection involved. The rule is that anything you choose to cover must be working at the time your contract becomes effective.
Premium coverage means that you will pay more than the standard version. Often you can get more components covered in one appliance by going this route. For instance, a standard plan will cover your dishwasher functions, and a premium plan will cover dishwasher racks, baskets, rollers and door seals. If you have a pool, central vacuum cleaners, built-in fans or garage door openers then thinking about coverage for these things is relevant.
What Happens if You Need a Repair?
If something that is covered by your particular home warranty breaks down you call the company that provides you with the warranty. From there, this provider than contacts one of their authorized repair companies, who, in turn calls you. The service is scheduled, the problem diagnosed and this repair person will either perform the repair on the spot, or orders and installs a replacement if warranted. You don’t even have to deal with sending the bill to the home warranty company since this is submitted directly by the repair company. You do pay a small service fee to the home warranty provider.
The Downside to Home Warranties
As you can see, a home warrant contract can be a valuable investment when owning a home. There are, however, issues for every consumer to be aware of when considering this as an option.
Consumer Reports published an article in September of 2014 regarding one company in particular that was faulted for denying multiple claims because consumers could not provide proof that the problem was not pre-existing, or that it was indeed properly maintained.
New Jersey officials said that Choice Home Warranty “repeatedly made it difficult if not impossible for consumers to realize the benefits of their so-called warranties,” the New Jersey Division of Consumer Affairs said in a statement announcing the complaint, which was filed in state superior court in Middlesex County.
The state claimed that the company sold coverage in at least 25 states and repeatedly denied claims even when technicians said covered products had been property maintained or that a problem wasn’t pre-existing. For some claims, the state said, the company demanded that customers provide years of maintenance records.
As for replacements, New Jersey said that the company offered consumers cash buyouts for hundreds of dollars less than replacement costs. There were also instances where local technicians refused to respond to dispatch calls because the company failed to pay them for their previous service.
While Choice Home Warranty said that it denies the allegations, this one instance highlights the importance of being vigilant when considering the home warranty option. Like anything else, there are opportunities by companies to take advantage of the consumer trust.
5 Options Besides Home Warranties
1) Invest at the Start
One thing that you can do for some peace of mind is to invest in reliable brands even when it means spending a lot more money. The investment in known brands comes with their reputation and this goes a long way towards ensuring your product is high quality throughout its life.
2) Over Maintain
Take seriously the notion of maintaining things and don’t consider it optional. Maintain appliances and systems impeccably, to the point of over-maintaining them. This can extend the life of appliances and systems so that they last until becoming obsolete.
If you think of a BMW and the myth surrounding outrageous repair costs and lack of reliability. Many BMW owners will over-maintain their vehicles by adding oil consistently throughout the life of the car. This has extended many automobiles beyond their expected life cycle.
3) Your Own Fund
Another option is to put the money you were going to spend on a home warranty into a savings account designated specifically for repairs. If you add to it every so often and at the same time make it off limits for any other purpose, you have your own warranty fund.
4) Credit Card Protection
Purchase appliances and systems on a credit card that offers an extension on purchase past warranty. This will protect you if a product breaks after the brand warranty expires.
5) State Protection
Under the implied warranty of merchantability that accompanies many purchases under state laws, retailers and/or manufacturers may be legally required to address a product defect even if the express warranty has expired.
It’s a new year and the days are getting longer. By the end of the month we will have gained over one extra hour of daylight so why not start looking for your next home in and around Hingham MA. One of the best Realtors on the South Shore, Alice Pierce, is the ideal person to show you around Hingham, Cohasset, Scituate, Hull and all of the South Shore towns. Not only is Alice Pierce a Hingham resident, but she has lived here all of her life and raised her family here.
Feel free to contact Coldwell Banker Realtor Alice Pierce through her website, email, telephone 781-724-7622 or by filling out this form to learn about articles, real estate services and community information for Hingham, MA, Cohasset, MA, Hull, MA, Norwell, MA and any other South Shore towns.