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The ABC’s of a Home Warranty

Think your home insurance policy covers appliances in your home? Think again.

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The cost of home repairs can quickly add up to hundreds or even thousands of dollars, and things always seem to break down at the most inopportune times. Anyone whose had their water heater bust the day before out-of-town guests arrive or their oven go cold the week of Thanksgiving can attest to this undeniable and unfortunate fact of life.

On top of that, the must-have items in your home that need repair or replacement due to general breakdown aren’t usually covered by your homeowners insurance policy, which typically protects your home and personal belongings in case of fire, hail, theft and some types of water damage. Meaning, you can’t file a claim against your homeowners insurance to help cover the cost to repair your fridge when it goes on the fritz or to replace your HVAC system when it dies.

For these types of situation, another form of protection can help; it’s called a home warranty.

Additional Coverage for More Protection

Without a home warranty, it’s your responsibility to repair or replace major home appliances or systems, such as HVAC, plumbing and electrical, when something goes wrong. As a result, you might need to raid your savings to cover the cost or put it on a credit card if your emergency funds are low or nonexistent.

Let’s say it’s your refrigerator that’s not working properly. According to Home Advisor, the average fridge repair runs between $200 and $330, and the cost to replace a refrigerator if it’s beyond repair averages between $1,000 and $2,000. In the case of your HVAC system going kaput, Bob Vila estimates the average cost of replacement at $7,000. In either case, you’re looking at an unexpected hit to your pocketbook. To make matters worse, you also need to find a repair technician and schedule a service call, which can be a time-consuming hassle.

With a home warranty, all you typically have to do is call your policy provider who will contact a repair technician within its network and schedule the service call for you. You do have to pay a service fee, which is sometimes referred to as a claim fee. This is generally between $75 and $125, but you’d likely pay something similar just to get an electrician, plumber or other repair technician to come to your home to diagnose a problem even without a home warranty.

Benefits of a Home Warranty

As with policies like your homeowners and auto insurance or coverage like pet, travel or legal insurance, you pay a premium to have home warranty coverage. In exchange, you enjoy several money-saving and time-saving advantages, which include the following:

  • Limits the out-of-pocket costs of repairing major home appliances and systems.
  • Saves your emergency fund for other unexpected expenses, such as a major medical bill.
  • Makes it easy to manage unanticipated breakdowns with one phone call.
  • Alleviates the need to find qualified service technicians or wait to get on their schedules.
  • Puts a network of qualified service technicians at your disposal.
  • Eliminates the need to try to fix things on your own, and potentially make matters worse.
  • Allows you to replace items if they can’t be repaired by service technicians.
  • Fills coverage gaps for certain situations excluded from your homeowners insurance.
  • Helps maintain your home’s value by keeping appliances and systems in good working order.
  • Gives you the flexibility to choose between basic and extended policies that protect one or more of a particular type of appliance or system, such as multiple refrigerators or HVAC units.

In addition, some home warranty providers offer 24/7/365 support and allow an unlimited number of service calls.

Covered Items Under a Home Warranty

Typical home warranties cover the repair or replacement of a number of items commonly found in your home that are not included under your homeowners policy when they break down, such as:

  • Kitchen Appliances: Refrigerators, dishwashers, ovens, ranges, cooktops, etc.
  • Laundry Appliances: Washers and dryers
  • HVAC Systems: Air conditioners and furnaces
  • Mechanical Systems: Electrical, plumbing, water heaters, wells, sump pumps, etc.

A Few More Details about Home Warranties

When you’re considering a home warranty, ask the provider these questions:

  • How big is your service network?
  • How often can policyholders request service calls?
  • When is your support line available to take policyholder requests?
  • What appliances and systems are covered?

In many cases, home warranties provide coverage regardless of an appliance or system’s age, make or model as long as you’ve properly maintained it. But be a smart consumer: Before you buy coverage, review its specific inclusions and exclusions so you know exactly what’s covered and what’s not.

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CUNA 2023 diamond award trophy icon

CUNA 2023 Diamond Award Winner

Financial Education

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