Understanding the Home Warranty Contract: Your Guide to Choosing the Right Plan

A “Home Warranty Contract” is a service agreement that covers the repair or replacement of many potentially costly home appliances and components. Many homeowners turn to it for protection against unexpected expenses.

Company Options

There are many home warranty companies today, such as American Home Shield or Choice Home Warranty, which offer a range of contracts to choose from. Contracts can differ in coverage, terms, and conditions.

Customer Story

Blake, a homeowner, subscribed to a home warranty plan to cover plumbing issues. Any surprise plumbing repairs would have cost him thousands without coverage, highlighting the value of his plan.

Potential Downsides

While beneficial, there can be challenges, such as contracts not covering all repairs, slow service, or a dispute on the cause of damage. For the best experience, it’s important to read the contract carefully.

What to Consider With a Home Warranty Contract

When considering a home warranty contract, it's important to fully understand the terms and coverage to ensure it meets your needs. Here are some key topics to consider when reviewing a home warranty contract:

Covered Systems and Appliances:

Identify and understand the systems and appliances covered by the warranty. Common items include HVAC systems, electrical, plumbing, kitchen appliances, and more.

Exclusions:

Note what is not covered by the warranty. Many contracts have exclusions for pre-existing conditions, cosmetic issues, and certain parts of covered systems or appliances.

Coverage Limits:

Check for any coverage limits, such as maximum repair or replacement costs. Some warranties have caps on how much they will pay for repairs or replacements.

Service Fees (Deductibles):

Understand the service fees or deductibles associated with each service call. This is the amount you'll be responsible for paying when a technician is dispatched.

Contract Duration and Renewal:

You should also review the contract duration. Home warranties typically last for one year and may be renewable. Make sure to also review the renewal terms and any potential premium increases.

Claims Process:

Next up, familiarize yourself with the claims process, including how to request service, response times, and the steps involved in getting repairs or replacements.

Authorization Procedures:

Know the authorization procedures before hiring your own contractor. Most home warranty companies ask for prior approval before allowing you to hire an independent service provider.

Emergency Services:

Determine if the warranty includes emergency services and the procedures for accessing them, especially outside regular business hours.

Coverage for Pre-existing Conditions:

Clarify whether the warranty covers pre-existing conditions, and if so, check the waiting period before such conditions are eligible for coverage.

Cancellation Policies:

You should also inspect the contract's cancellation policies, including any fees or penalties associated with canceling the warranty before its expiration.

Transferability:

If you plan to sell your home, make sure to find out if the warranty is transferable to new homeowners, which can be an attractive feature for potential buyers.

Customer Reviews and Reputation:

Research customer reviews and the reputation of the home warranty company. Positive feedback and a reliable reputation suggest a trustworthy provider.

Reading the fine print and asking questions about any unclear terms is key when evaluating a home warranty contract. For the best experience possible, it’s best to consider multiple contracts from different providers to find the one that best fits your needs and offers solid coverage for your home.