Owning a home comes with mixed reactions of excitement and anxiety. The excitement is due to the great achievement of finally being your own landlord, while the anxiety comes from fearing that things may break in it and cost you money for repairs. However, you need to live in your home with peace of mind.
Residential warranties are designed for just that. They cover your systems and appliances so that they’re repaired or replaced if any of them breaks. According to Porch’s research, it’s estimated that every American uses between $14890 to $18151 to maintain his home and make it appealing. DIY maintenance takes around $250 to $750 annually.
An American home residential warranty can cover most appliance and system costs. In this article, you’ll learn everything you need to know about this warranty.
What’s A Residential Warranty
This warranty is a service contract lasting a year or two that’s meant to cover the costs of replacing or repairing home appliances and systems if they break or are unusable because of wear and tear. Residential warranties have different coverages, though they’re not a replacement for a homeowner’s insurance. They’re activated when the covered items wear and tear or break.
Levels Of Residential Warranty
Every residential warranty company gives different pricing for their plans. Some will only cover the main appliances, while others only cover systems. Some allow you to choose what you want to be covered. Residential warranties that offer a replacement for broken items are more expensive than those that only repair them. Additionally, expensive residential warranties have higher limits and may have lower deductibles.
The Difference Between A Residential Warranty And A Manufacturer’s Warranty
Most homeowners tend to confuse a manufacturer’s warranty with a residential warranty. However, these two aren’t similar. A residential warranty is a one or two-year service contract covering various systems and appliances and can be renewed. On the other hand, a manufacturer’s warranty provides coverage for specific appliances from when you buy them to a set expiration date.
The Difference Between A Residential Warranty And Homeowner’s Insurance
A homeowner’s insurance gives compensation when the covered items are affected by accidents or theft. It has exclusions concerning wear and tear. Unless an accident damages these items, insurances don’t cover wear and tear. For example, if a pipe bursts and the water damages your refrigerator’s mortar, your insurance company will cover for that. However, a homeowner’s insurance won’t. This warranty will only cover your fridge if it has stopped working because of malfunctioned parts.
How A Residential Warranty Is Factored Into The Home Buying Process
You can only take a residential warranty cover after you’ve closed on the property and conducted a home inspection and appraisal. A home inspection is important because it’ll help you know what you’re buying. You might think that the property is good looking, but it could have some expensive repair problems. No homeowner wants to purchase a home only to be bombarded with expensive repairs shortly after.
Home inspections are necessary to unearth potential issues that may cost you money after buying your home. If there are things that need to be fixed, you can negotiate with the seller to do the necessary repairs and replacements before closing or reduce the house’s buying price to enable you to have some money to offset the costs.
You need to pay attention to some key items, including the roof, foundation, HVAC system, mold, and the septic tank. When you understand the state of systems and appliances in your new home, you’ll know which items need a home warranty.
What A Residential Warranty Covers
Residential warranties generally cover the mechanical components of plumbing, HVAC, and electrical systems. Some appliances that home warranties cover include refrigerators, ovens, and dishwashers. More expensive residential warranty plans cover fans, water heaters, pool and spur equipment, air conditioning, and septic pumps.
It would be disastrous to assume that every warranty covers the repair or replacement of all items. Some warranties only offer replacement options if you select higher plans. Therefore, it’s vital to carefully go through the warranty document to determine what’s covered and not covered. That way, you’ll select a plan that covers most of your appliances.
Additionally, you need to know the terms used in the fine print. That’s because it’ll help you request the appropriate service records before your warranty company covers your systems. You also need to understand that a residential warranty company may send their repairmen many times in a row to fix covered items before finally replacing them. Most home warranties don’t cover items that are more than ten years old.
If you own a home with complex systems, a warranty may only cover some components and not the entire system. For example, in some warranty company’s plans, plumbing stoppages have a different cover from the plumbing system. If a stoppage breaks the entire plumbing system and only have coverage for stoppages, the warranty will fix the stoppage, but not other plumbing problems.
How To Use A Residential Warranty
Reporting problems to residential warranty providers appeal to many customers. In case you face a problem with your systems or appliances, you can ask for a service request from your warranty company through an email or a phone call. The company will then send a licensed maintenance specialist within its network to assess the system. In most cases, the company pays for the contract fees and repair services. However, as a homeowner, you’ll be responsible for a deductible or copay.
A deductible is the money you pay when different repairers visit your home in response to your service request. It’s also known as a service call fee. If you select a higher deductible, you may lower the annual plan fee. Warranty companies offer coverages for every item and the limit you pay annually depends on the plan you select. However, most limits are between $500 to $2,000 for each appliance or system.
However, some warranty plans can give you unlimited service requests. That means the company will send out maintenance specialists whenever you need them to repair your covered appliances. Fortunately, not every plan will need a call fee for every home visit.
Advantages Of A Residential Warranty
- It can offer coverage after a manufacturer’s warranty expires
- It covers many items and saves you from the hustle of tracking the warranties for those items separately
- If expensive systems or appliances like refrigerators break down and can’t be repaired, a residential warranty company may replace it
- They give you deductibles before a repairman arrives so that you’re aware of what you need to pay
- It covers items that insurance doesn’t cover
Disadvantages Of A Residential Warranty
- Warranty fine prints may have many limitations and exclusions
- You have to wait for a month before you can use a warranty
- Most residential warranty companies prefer repairing appliances because they’re cheap to do compared to replacing them
How State Rules And Regulations Affect Warranties
States have different regulations governing the purchase of home warranties. For example, in New Jersey, home builders must give a residential warranty to homebuyers. These coverages may offer different plans from those given by residential warranty companies. In some states, such as Texas and Florida, warranty contracts are regulated. Therefore, before settling for a residential warranty plan, you need to know your state’s rules to enable you to identify companies operating with a proper license.
Consulting your state’s policies can help you not to fall prey to an unlicensed company. Additionally, you can check the list of licensed residential warranty companies from your state’s website. Some states only require licensed companies to offer services if their work values are above $20,000.
The Bottom Line
Home warranties can be a good way to save money if you understand how they work. Most homeowners love to buy warranty plans to prepare for any eventuality. You never know when your appliance or system may break down. But with a warranty plan, you’ll be sure it’ll be repaired even if you’re broke. However, if you consider to take a warranty plan for your appliances, ensure you know what’s covered and what’s not covered.