What is a Home Warranty: A Guide to Understanding These Policies

A home warranty is a service agreement that pays for replacing or repairing the main appliances and systems in the house due to regular wear and tear. To put it in simpler words, it is a subscription where one pays regularly to a company, and, in return, they offset a portion of the financial burdens one might bear to maintain their property.

This might sound like insurance, but the most significant difference is that a house warranty concentrates on the condition or operation of your home’s internal systems and equipment, as opposed to homeowners’ insurance, which guards against damage from theft, fires, and natural disasters.

A home warranty policy is the specific terms, conditions, and coverage details of a home warranty plan. The majority of home warranty policies are renewable and valid for one year. Just make sure you read the fine print, as there can be exclusions and limitations in different policies. 

One example is if your HVAC (Heating, Ventilation, and Air conditioning) system breaks or your refrigerator stops working, you might be reluctant to handle it right away due to the cost. A home warranty can help cover the fees of repairs or replacements to the property. This makes it an attractive option for homeowners looking to save money in their budget and take care of their house.

A home warranty typically follows the steps below:  

1. Selecting then Purchasing a Plan: A person can choose from many types of plans. It doesn’t have to be one with full coverage, as some primarily focus on appliances or systems. These plans usually have an annual or monthly fee.
2. Filing the Claim: A ‘claim’ is using your rights as a policyholder to formally request coverage or compensation from the company in charge of your warranty. When an item under the plan’s cover breaks down, the homeowner contacts the warranty provider to file a claim.
3. Technician Visit: The provider usually sends a licensed professional to diagnose and repair the issue.
4. Paying the Service Fee: This is what you, as the homeowner, would pay for a valid claim.

Financial security is one of the best reasons to sign up for a home warranty policy. It reduces costly home repairs by funding to replace or repair covered items.

For example, if your water heater breaks down during the cold season, replacing it would cost thousands of dollars. However, you will only be responsible for the service charge if you have a home warranty.

Searching for a local repair technician you can trust can be difficult, but the burden of locating one is alleviated with a home warranty. When you’ve signed up with a home warranty plan, everything is managed by the warranty provider: searching for a technician, successfully requesting their services, and scheduling repairs. This reduces the time for busy owners who just don’t have the luxury of connections, time, or resources to investigate and screen service providers. 

It can be such a relief to know that your house’s main appliances and systems are covered. Regardless of whether it’s a malfunctioning dishwasher or a faulty electrical system, a home warranty can ensure that you’re prepared for most expenses one might expect. 

The majority of house warranty plans include coverage for the fundamental home systems, like:

HVAC systems: Heating, ventilation, and air conditioning

Plumbing: Garbage disposals, water heaters, drainage systems, and pipes

Electrical systems: Outlets, circuit breakers, and wiring

Major appliances like the ones mentioned are usually covered by home warranties, too. 

Kitchen appliances: Ovens, microwaves, dishwashers, and refrigerators  

Laundry appliances: Washers and dryers

Remote entrances and exits: Electrical and mechanical parts of garage door openers

Numerous providers give optional add-ons for things that aren’t common in most basic home warranty plans, like:

Pools and spas: Coverage for pumps, filters, and heaters.  

Second refrigerators: Additional protection for secondary units.  

Well pumps and septic systems: Coverage for rural homeowners.

Even though home warranties provide a wide range of coverage, there tend to be some common exclusions, as well as reasons your claim might be rejected, which is significant in defining what is a home warranty policy.

A system or appliance will not be covered if it was already broken or not working when the insurance began. This is why ensuring everything is functioning before a home warranty is implemented is essential.

Home warranties usually do not cover damage brought on by neglect, carelessness, or poor upkeep. For instance, the repair cost for your HVAC system might not be covered if the malfunction resulted from a lack of regular servicing.

Home warranties typically do not cover dents, scratches, or other cosmetic problems. Rather than outward or visual defects, policies concentrate on functional fixes.

A home warranty might be a smart purchase if your house is older and has deteriorating appliances and systems. Houses like this can have many age-related problems. A home warranty can help mitigate these expenses.

Manufacturer warranties are frequent for new houses. It will be an excellent approach to protect against early problems with the properties or installation flaws.

Providing a home warranty can increase the appeal of your house to interested buyers. It gives buyers an extra degree of confidence by guaranteeing they won’t have to pay for repairs immediately after moving in.

A home warranty is an invaluable tool for homeowners trying to save a little or a lot on future repairs from upcoming maintenance expenses. A home warranty policy can do a lot, such as providing convenience, peace of mind, and financial protection in covering major systems and appliances. Consider a home warranty whether you’re selling your house, purchasing a new one, or just trying to protect your investment. 

Needless to say, a clear definition of a home warranty policy helps a lot. Make sure to read the details or agreements, compare providers, and select the one that meets your needs before buying a plan. With the correct home warranty, no matter what shocks life throws at you, you can rest easily knowing that your house is covered. 

Related Articles on Dividend Power

Here are my recommendations:

Affiliates

• Simply Investing Report & Analysis Platform or the Course can teach you how to invest in stocks. Try it free for 14 days. 






• Sure Dividend Newsletter is an excellent resource for DIY dividend growth investors and retirees. Try it free for 7 days.






• Stock Rover is the leading investment research platform with all the fundamental metrics, screens, and analysis tools you need. Try it free for 14 days.






• Portfolio Insight is the newest and most complete portfolio management tool with built-in stock screeners. Try it free for 14 days.

Receive a free e-book, “Become a Better Investor: 5 Fundamental Metrics to Know!” Join thousands of other readers !

*This post contains affiliate links meaning that I earn a commission for any purchases that you make at the Affiliates website through these links. This will not incur additional costs for you. Please read my disclosure for more information.