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How to choose a home warranty plan: what you need to know

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This guide outlines they key factors you should consider when looking for a good home warranty plan.

Damages are an inevitable part of owning a home – and the more extensive the damages are, the higher the repair costs will be. When you are buying a home, you are making a significant investment, and since not all damages are covered by standard home insurance policies, paying for costly repair could make you lose your ROI (return of investment). A suitable home warranty cover can protect your property and save you a lot of headaches, but picking one isn’t exactly a straightforward process.

Choosing a home warranty plan

To help you out, this guide brings you four things to take into account before choosing a home warranty company.

What’s Covered in the Home Warranty Service Agreement

Read the fine print. Read and understand what each home warranty service provider offers in terms of warranties. It can’t be stressed enough, read the fine print. Some Service Agreements cover only basic home systems and major appliances, while others also extend to smaller devices. When going over this document, make sure to check your homeowners’ insurance policy, as well, to see what you already have protection against. 

Often, the home warranty plan will be needed to cover the gap between your existing insurance and possible out-of-pocket expenses. Before automatically opting for a policy in the lower price range, consider what you actually need in terms of pricing and coverage. Most inexpensive options won’t cover major appliances, which are also the most expensive systems to replace or repair. If you own a home that has several old appliances and you want to ascertain that their repair costs will be covered, make sure this is included in the Service Agreement.

If you have trouble determining the future needs of your home, you should consider customizable plans. These can save you a lot of time and money on manually researching the protection you need at a reasonable price.

Limitations of the Individual Home Warranty Plans

There might be broad-coverage home warranty policies, but there is definitely no all-inclusive home warranty plan. If not for the exclusion in their services, companies wouldn’t be able to offer competitive prices to their customers, and fewer people would be able to afford them. That said, the limitation can be challenging to understand, which is why you should take the time to revise all the plans you are considering. 

On closer examination of the different terms and conditions, you may find that some plans will only partially cover the major appliances, such as refrigerators, hot water heaters, or HVAC systems. Or, some systems may not be covered at all if they get damaged under specific circumstances, like a power surge. Some contracts will even specify the terms of care for each appliance, and if you fail to install or maintain them properly, they will not be covered and you will need to replace or repair them from your own budget.

Another reason it’s worth going the extra mile and looking for specific limitations in a warranty plan is so you can be prepared for covering the gaps. Buying additional insurance for the items your policy won’t cover is one possible solution. A second, more affordable solution would be putting away money you plan to use as coverage for these items in a savings account dedicated solely for this purpose. Either way, you will have an additional financial cushion to lay back on in case of sudden damage or breakdown.

The Costs of the Different Home Warranty Plans

The cost of the policy is another crucial factor that determines which home warranty you choose. The pricing depends on several factors, including:

  • The provider: Some providers offer more limited choices than others, which means the gaps in the pricing will be larger.
  • Where you live: Providers in densely populated metropolitan cities charge more for the same type of coverage than those in less popular areas.
  • The type of plan: Generally, your policy can cover either one particular device, several major appliances, or your plumbing and electrical systems on top of your other appliances. 
  • Contractor fees: Most warranty companies work with independent contractors who charge a fee for their work. Not all providers include this copayment in their original pricing.
  • Exclusions and limitations: Adding specific exclusions may lower the cost of the policy. This option is recommended for services you are sure you won’t need.

When factoring in all these elements, it becomes obvious that the more protection you need, the higher price you will have to pay for your policy. That said, the service provider at https://homewarranty.firstam.com/ would always recommend opting for suitable coverage for unexpected damages, regardless of the costs. After all, the more protection you have, the less likely your budget will suffer the repair or replacement costs of a much-needed appliance.

  1. Replacement and Repair Options

If the repair costs of an item exceed its market value, the warranty company may consider offering a replacement instead. However, some companies will offer the total depreciated value of the item. So if you want to buy the same model you had before, you will have to cover the cost difference from your pocket. If your home is equipped with digital equipment, this may not be a suitable solution for you. In that case, make sure to look for an option that offers the fair market value of the items.

On the other hand, if the home warranty plan states that broken items will be repaired regardless of the costs, look into whether the company uses licensed and insured contractors. After all, this is one of the greatest benefits of having a home warranty plan on top of a homeowners insurance policy that rarely covers repairs. With licensed independent service contractors at your disposal at all times, you can get the most out of your warranty.

Summary

As a responsible homeowner, you must do your homework, do due diligence, and research every possible option before choosing a home warranty plan. Pay close attention to what is covered in the Service Agreement and what’s excluded from the policy. To avoid unpleasant surprises, make sure you understand all the limitations of each policy you are considering. 

Lastly, look into whether the company will replace or repair broken items and ask who will perform the repairs. A reputable company will always provide you with licensed and insured technicians you can use should you need them in the future.

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