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Home Warranties 101

In central Ohio, when a home is listed for sale, it’s typical that the seller will offer to provide a one-year home warranty as an incentive (and piece-of-mind) to prospective buyers. Many questions arise about them. What is a home warranty? What is covered? Who pays for it? When does coverage start?

Useful Information About Home Warranties

What is a home warranty?

A home warranty is a service agreement that covers the repair or replacement of many major home system components and appliances that typically break down over time do to normal wear and tear.

What is covered?

Most home warranties include coverage for the HVAC system; Heating, Cooling and Ductwork. They also cover the electrical system, plumbing, water heater and several kitchen appliances. Some include the washer and dryer.

There is no coverage for the structure of the home, windows, water getting in through the foundation or things that might be covered by home insurance.

Does it cover aging appliances or furnaces?

Most policies do cover items that are aging, HOWEVER, it is important to read the terms and conditions of your policy to determine that. Most home warranty companies offer full replacement regardless of age, while a few others do not. Regardless, it is common that during the first 30 days of coverage, there may additional limitations.

How much are they and who pays for it?

Most one year home warranty plans start around $400 and go up to almost $700. Most have a Trade-Call-Fee of around $75 to be paid anytime a claim is made. Think of it as being comparable to the deductible you might have on your home or auto insurance.

Most home warranties are paid for by the seller of the home as part of the negotiated agreement, but it is not uncommon for buyers to decide to pay for one even when that is not the case.

When does coverage start?

Coverage starts on the day of the closing of the home and typically lasts for 12 months. Of course, home warranty companies are interested in long-term relationships. Some offer multiple year plans at a discounted rate, but all will offer to renew your plan at the end of the first year.

What do I do when something breaks?

Most home warranty companies have dedicated claims centers that can be reached by phone 24 hours a day or via an online portal. Once a claim has been made, a contractor will be assigned to your case and will contact you to make an appointment. They will diagnose the cause of the breakdown and, if it is determined to be covered by the terms of the warranty, fix it.

Will the home warranty cover all of my costs?

Most of the time, besides the trade-call-fee, the homeowner experiences no additional cost. BUT, sometimes the scope of the problem fall outside of the terms and conditions of the coverage. In that event, there may be some cost that the homeowner will need to absorb.

Can I buy a home warranty even if I’m not buying or selling my home?

Yes, you can. Most home warranty companies offer plans designed to maximize your needs no matter how long you’ve been in your home. Take note that some policies will start their coverage 30 days after the homeowners purchases the plan. This is usually the case when the home has not recently been bought or sold.

Do I need to order a home inspection before getting a home warranty?

No, but it’s a great idea to get your home inspected to ensure that the coverage of the home warranty is maximized. Home warranties do not cover pre-existing conditions. Home inspections are designed to help you know what is in good working condition and what needs to be repaired or replaced before you take possession of your home.

Why do claims get denied? What are some common examples?

KNOWN PRE-EXISTING Conditions are not covered by home warranties. That means that anything that appears on a home-inspection report is known. So, make certain to have those issues dealt with before the closing.

Also, misuse or abuse of a covered system and appliances will lead to a denial of your claim.

When does coverage begin and end?

It depends on the policy. For the buyer, it begins on the day of the closing and typically last for one year.

For the seller that is offering to provide a home warranty to the buyer, there is a bonus. Most home warranty companies offer “free” listings coverage to any homeowner enlisting the help of a Realtor. It starts the day your Realtor enters your home into the MLS and lasts for up to 180. Some home warranty companies will extend the length if the home remains on the market for more than 180 days. It’s a win-win for the seller and the home warranty company! It’s an incentive to make certain that the product is being offered and “written in” to any deal. Since it’s almost always negotiated into the purchase of homes anyway, it is a great opportunity for the seller to add protection against the unexpected.

A special thanks to Tom Nichols from Choice Home Warranty for contributing to this post! Feel free to contact Tom for any home warranty questions or services. He can be reached at 614.674.7862, or via email at tnichols@choicehomewarranty.com.