How To Choose The Best Home Warranty Plan

Home warranties are designed to make life easier for homeowners. Instead of having to pay out of pocket every time a refrigerator stops running or an electrical fixture malfunctions, homeowners can take out warranties that will cover a wide range of appliances and home support systems.

How Home Warranties Work

Most appliances and home equipment come with some kind of manufacturer’s warranty, and installation contractors often offer workmanship warranties as well. That coverage will run out eventually, often after just one to three years. Once the appliances and equipment are no longer covered by the original warranty, homeowners will be on the hook for paying for expenses like repairs and unit replacements.

When equipment damage comes up seemingly out of nowhere, it can throw a huge wrench into a family’s financial plans. Replacing appliances or repairing home support systems can be incredibly expensive. 

Homeowners who take out home warranties don’t have to worry about finding technicians with relevant industry experience and paying for whatever repairs or replacements are required to get things back up and running. Instead, they pay a low monthly fee to their home warranty companies, then call to inform them as soon as something goes wrong. The home warranty company then schedules the service call with a reputable contractor and pays for the repairs.

How to Find a Good Home Warranty Company

It’s never wise to just choose the first home warranty company that comes up on a Google search. Instead, homeowners should do some research to make sure they’re working with reputable providers.

Start by making a list of companies in the area. Next, take note of what kinds of service they offer and how much each coverage level costs. Some companies only offer very basic plans that cover kitchen appliances and not much else, while others have a range of comprehensive options.

It’s also important to check the coverage limits and exclusions. Homeowners with expensive appliances or equipment may need more coverage than those with very basic models. Narrow down the list according to who offers sufficient coverage.

Finally, read through some online reviews for each company, paying attention to trends rather than individual complaints or praises. Choose the company that has the best reputation even if it means paying an extra few dollars a month.

How to Choose the Right Plan

Now that homeowners know what companies they want to work with, it’s time to get serious about choosing plans. It’s difficult to make generalizations here because every homeowner is different. To complicate matters further, some home warranties are designed not for current homeowners but for builders or real estate agents.

Plans for Current Homeowners

The best place to start when choosing a home warranty plan for current homeowners is with a list of the household’s potentially covered appliances and equipment. After all, there’s no sense in purchasing a plan that covers central air if the home has a wood stove and no centralized air conditioning system.

Next, consider the cost of repairing or replacing major home systems. Some are more expensive than others. While the average cost to repair a washing machine, for instance, runs between $150 and $300, replacing a full heating system can require an investment of $7,000 or more. The reason it’s so important to get a grip on these costs is that it can help homeowners determine whether they’ll be able to put enough aside in an emergency fund to cover them out of pocket or whether it makes more sense financially to make monthly payments for warranty coverage.

If the home has expensive systems and appliances, it’s usually more cost-effective to take out a comprehensive warranty. However, factors such as the age of the home, how recently the electrical, plumbing, and HVAC systems were installed, and how long the family plans to live in the home can all play a role. When in doubt about what level of protection will offer the best balance between coverage and affordability, ask a professional for advice.

Plans for Real Estate Agents

Home warranties aren’t just for a property’s current residents. Real estate agents often take out warranty plans on the homes they plan to sell either as a means of attracting buyers or to protect their reputations. 

Unexpected equipment failures can jeopardize closings and lead to bad blood between buyers and real estate agents. Having a home warranty in place means that real estate agents don’t have to worry about negotiating with current owners and potential buyers about who will replace the furnace or make repairs to the electrical system. Instead, they can call the home warranty company and let these experts make all the arrangements.

Plans for Home Builders

It may be tempting to assume that buying a newly built home will alleviate all of a client’s concerns regarding appliances and home support systems. In fact, things can, and often do, go wrong for even the most reputable home building contractors. The good news is that some companies offer builder warranties that cover structural claims.

Builders’ coverage usually covers permanent parts of the home such as floors, plumbing, and electrical work. The length of coverage for builder warranties varies from one to ten years, but it tends to be extensive. A builder plan should offer limited coverage for specific components of the home, including windows, heating systems, ventilation, plumbing components, and more. Builder home warranties protect both contractors and home buyers.

Additional Tips for Choosing a Plan

Still not sure what plan will be the best fit? Here are another few tips that could help make the choice easier:

•  Read through the contract thoroughly.
• Ask about exclusions and limitations.
• See if the company offers a la carte coverage for appliances like washers and dryers.
• Err on the side of caution when it comes to coverage limits.
• Don’t be afraid to ask questions of the warranty company.

The Bottom Line

Home warranties offer an extra level of protection for home builders, buyers, sellers, and owners. Homeowners, real estate agents, and contractors have plenty of options when it comes to choosing plans. Most should purchase the most comprehensive plans they can afford, as it will help to keep home maintenance costs low in the long run.