A guide to home warranties, including information on what they cover and new home warranties
A home warranty is a form of insurance that covers your home if repair or replacement of appliances or certain systems are needed. The trick with a home warranty policy is choosing one that will cover the types of repairs that may be needed issued by a company that will not deny your claims.
Companies may deny coverage for reasons such as the homeowner’s “maintenance neglect,” issues of “pre-existing conditions,” or because the nature of the repair falls outside the coverage boundaries. The only way to really protect yourself is to do extensive research before choosing a policy and to read every single line of fine print in the contract.
The typical cost of a policy is between $300 and $450 per year. Most policies have a deductible of from $50 to $100 per incident. With most policies, you cannot combine two or more repairs into one service-call deductible.
What does the typical house warranty policy cover? Though coverage varies from one house-warranty company to another, most will cover these primary areas:
1) Some major appliances. Appliances such as the stove, refrigerator, and built-in dishwasher are typically included. Some policies include coverage for the garbage disposal, trash compactor, built-in microwave, washing machine and dryer, and ceiling fan, but others do not.
2) Heating & cooling systems. Furnaces, air conditioners, heat pumps, and their ductwork are generally covered. Portable air conditioners and heaters are usually not covered. Because of the high cost of repairs to heating and cooling systems—typically from $600 to $3,500—this is one of the more important coverages of a typical house warranty.
3) Plumbing & electrical systems. If the electrical and plumbing systems are properly installed, they are usually covered by a house warrranty. This coverage extends to electrical panels, wiring, indoor pipes, and drains. though typically not for faucets or outdoor plumbing such as sprinkler systems. A rider to the policy is usually needed for swimming pools and hot tubs.
Most new homes are protected by a one-year warranty on defects in materials and workmanship, though a warranty is not required by law. Under a new house warranty, the builder is obliged to repair items when contacted (usually in writing) by the homeowner.
Ask about the new house warranty before buying-and be sure to get a signed warranty document. In addition, be sure you receive a package with product warranties-including materials and appliances that are offered by the various manufacturers. If something goes wrong with these parts of your home, you must contact the manufacturer, not the builder.
Some builders offer an extended new house warranty, called an “insured warranty.” This generally covers any systems-plumbing and electrical, for example-for a two-year period. It may also warranty the structure for up to 10 years. Insured warranties are actually issued by an insurance company, so your home is covered even if the builder goes out of business.