Tips for Evaluating a Home Warranty
Home warranties can be compared to an insurance policy. You pay the premiums based on the perceived risk and the level of coverage you want. In theory, the home warranty will pay for the repair or replacement of various items around your home. However, home warranties often fall short, though this could be because of the insurer or customer error. Here are a few tips for evaluating a home warranty.
The Limitations of the Warranty
Learn about the limitations on the home warranty before you commit to it. It may require you to get the furnace or washing machine repaired three times before you can get it replaced under the warranty. Are you willing to live with that? Do they require the covered appliances to get regular maintenance? If you take out that warranty and don’t have the HVAC equipment serviced three or four times a year by a licensed HVAC tech, then the next AC compressor breakdown isn’t covered by the warranty. Do they require you to use their network of technicians? Now you’re waiting for their service people, though a cheaper one or someone willing to come out this weekend is available. Furthermore, they may have a complex claims process that puts up so many hurdles you don’t want to deal with it.
Home warranties should pay enough to repair the appliance or replace it, if things are bad enough. It isn’t worthwhile to pay a thousand dollars a year for a warranty that won’t pay enough to repair much less replace an item. Nor are you getting your money’s worth if you’re paying high premiums that cost more over the life of the appliances than it would to replace it. For example, you shouldn’t pay 50 bucks a year to insure a toaster and blender you could replace for that much money.
The Total Coverage
A warranty for your home will only cover what the warranty contract says it will cover. The average home warranty only covers critical equipment inside your home like the HVAC system, washing machine and dishwasher. You typically have to take out a separate policy or rider on the main policy to get coverage for a pool pump or irrigation well pump. They often cover your electrical and plumbing system, but they will not cover damage that was preventable. For example, they’re not going to pay to repair damaged wiring if you did it yourself instead of hiring an electrician.
Home warranty premiums are based on the cost to repair or replace the item. If you have an oil burning furnace in a part of the country where that is rare, they may not cover it. If you have a solar hot water system, it probably won’t be covered without a special rider though they may cover the average hot water tank when it breaks.
Home warranty coverage should not be confused with your homeowner’s insurance coverage. The home warranty won’t cover losses associated with fire, hail or flooding. A homeowner’s insurance policy won’t cover the cost to repair the broken dishwasher, though they may pay to repair the water-damaged floors. This is why you should consider a home warranty in addition to your homeowner’s insurance.