What Is A Home Warranty
A home service plan is a service contract that provides for the repair or replacement of major components of your systems and appliances that fail due to age and standard wear and tear. For instance, parts of your kitchen appliances, washer and dryer, and HVAC, electrical, and plumbing systems are all typically covered under this home service plan. You can also cover larger systems like your pool and spa.
How Much Is A Home Warranty
Home warranties typically have 12-month contract terms and, unlike homeowners insurance, are not mandatory to obtain a mortgage. A home service plan is purely elective typically coming after you have already purchased a homebut its a smart purchase. Home service plans can be purchased for a low monthly cost, with add-on coverage for items like roof leak repair or pools and spas available for an additional cost.
What Do Home Warranty Plans Cover
Home warranties generally cover failures incurred from daily wear and tear to both your homes major appliances and systems such as:
- Major kitchen appliances like your fridge or built-in microwave
- Clothes washer and dryer
- HVAC systems like your air conditioner
- Plumbing and electrical systems
- Smart home system integrations
With a Cinch Home Services plan, you pay a monthly fee for our services. You set the price and it can range from $45-$65 per month. We offer flexible home protection plans that fit your specific needs you can choose an Appliances Plan, Built-in Systems Plan or Complete Home Plan and add on additional items, such as a pool or well pump.
While home insurance policies are typically required for homeowners, a home warranty plan is never mandatory. But since insurance policies dont cover costs for daily wear and tear to the appliances and home systems you rely on, warranty coverage can save you a lot of trouble and money.
This is especially true for a first-time home buyer who might be under even more financial strain when purchasing their first house than someone who is upgrading to their next home. Home warranty coverage not only fills the gaps in coverage left by your insurance policy, but it also protects you from unpredictable upfront costs of appliance repair or replacement.
How are repairs and replacements handled under home warranties?
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Why Is First American The Best Choice For A Home Warranty
When you choose a home warranty from First American, you get industry-leading coverage backed by the First American name. Were committed to providing superior value, and with over 35 years of home warranty experience, we have the strength and stability to honor our commitments to you.
We offer plans to fit almost every budget, and coverage and options to make sure your home and budget is protected. See how easy it is to check out our home warranty cost comparisons and find the right coverage for your home.
* Some plans purchased as part of a real estate transaction will protect you from unknown pre-existing conditions if, when coverage begins, the defect wasnt known or could not have been reasonably observed by looking at or operating the system or appliance.
** Paid invoices net of service fees in 2018, prior to deductions and/or rebates.
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What Is A Homeowners Insurance Policy
A homeowners insurance policy protects the owner of a property primarily from damages that the home sustains due to a natural disaster or some other unforeseen circumstance.
Many people are familiar with homeowners insurance as it is generally a requirement put forth by the mortgage lender when a house is being purchased.
Since 88% of American buyers finance their home purchase, then you can see why it makes sense that most homes in the United States have a home insurance policy on them.
The bank wont require you to keep a policy after you pay your mortgage off, but many homeowners choose to keep their insurance active just to keep their peace of mind and because it really is a prudent thing to have.
Think about why a mortgage lender requires you to have a homeowners insurance policy, as understanding their motivations will help you understand what a home insurance policy covers and what it does not.
The mortgage lender will typically finance over 80% of the value of a house in a typical purchase, usually with a 30 year term. The ideal scenario for the lender is for you to pay off your mortgage in the agreed upon term.
You get to own your house outright, the bank gets paid the mortgage plus interest, and everybody comes out happy on the other end. Now lets wall through a couple of scenarios where the bank does not end up with an ideal outcome.
The most obvious and perhaps most common one is you default on your loan and the bank stops receiving payments.
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Pros And Cons Of Home Warranty
Here we provided positive and negative aspects of home warranties.
- Financial coverage for appliances that need to be replaced
- Has a streamlined process, where the home warranty company sends a service provider to your home
- Cheaper fees compared to replacing or fixing an appliance completely
- Coverage limits on repair costs
- Potential additional steps such as showing receipts
- Limited network of service professionals Warranty companies do not compensate you if you try to DIY
If youve recently bought a home, you already have a home warranty, whether it has been included or because you obtained it yourself. If your home warranty is set to expire, though, its time to decide whether renewing your contract is worth the cost and if you should renew your home warranty.
What Doesnt A Home Warranty Cover
Home warranties specifically cover damage that occurs as a result of everyday use. Home warranty providers reserve the right to deny coverage based on insufficient maintenance.
Accidental damage, damage caused by improper installation or modification and pre-existing conditions are also often excluded from coverage. However, some companies, such as American Home Shield, cover unknown pre-existing conditions that cant be detected via a simple mechanical test or visual inspection.
With that said, home warranty providers will typically allow you to read the service agreement before signing up for a plan. Youll want to take extra time to read through the sample agreement thoroughly so that you are aware of any possible exclusions or limitations of your policy.
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What Is Covered Under Home Insurance
It is important to understand what is covered under a home insurance vs. home warranty. Homeowners insurance provides people with the coverage and compensation to repair or rebuild your home after events like fire, smoke, theft, vandalism, falling trees, lightning, wind, or hail. Plans also include coverage of medical and/or legal costs due to injury of visitors.
Typically, policies will also cover extensions to your home such as garages, sheds, barn, outdoor grills or fireplaces, and fences. Additions such as a swimming pool or hot tubs may be included, but will likely carry an additional cost.
Your plan may also cover expenses accrued during repairs, such as hotel stays and restaurant meals, or compensation for lost rent if the property is a rental investment.
Be sure to thoroughly read through your policy protections and understand its limits. For example, most policies do not include earthquake or flood coveragethough might be available for additional fees.
Home Warranty Vs Home Insurance
We often get asked what the difference is between home insurance and a reputable home warranty. In researching this topic, we reviewed the differences in home warranties versus homeowners insurance in terms of contracts, coverage, and costs.
Its important to know the difference between homeowners insurance and a home warranty. Both are important in helping you deal with unexpected issues that could be costly, but each provides peace of mind in different scenarios.
In our guide below, well explain to you why each home protection plan is important in their own ways and why you need both.
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Why You Should Have Both A Home Warranty And Homeowners Insurance
A common mistake homeowners make is believing that their homeowners insurance is all inclusive. They think it will cover everything and anything that goes wrong in the home.
But it isnt and it wont.
For the most comprehensive home protection, homeowners often combine their homeowners insurance with a Home Warranty Service Agreement. Lets look at what a Home Warranty Service Agreement covers compared to what homeowners insurance covers. Well then look at why having both is the best way to protect your home.
How Much It Costs
The average comprehensive home warranty costs around $50 per month . In addition to the monthly rate, you pay a service call fee each time a technician is called out to your house. The fee is usually between $55 and $150. If the item is covered, the warranty company pays 100% of the cost for repair or replacement.
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Do You Need Both A Home Warranty And Home Insurance As A Homeowner
Given how vastly different the two coverage is between them, its difficult to claim theyre mutually exclusive. Home insurance is a must, whether or not you are forced into it through the law or your mortgage company. Some things are worth protecting, and your home is, of course, one of them. How often you have claims depends on what state you live in , but its necessary nonetheless, particularly as it covers fire and water damage. In the long run, it may help you save a lot of money.
The same logic tends to apply to home warranty insurance, although it doesnt quite hold the same weight. Your home is nothing without your home systems to keep you comfortable, your appliances that make your life easier, and your environment that is cleaner and safer with them. The difference is that the potential cost of damage is less with systems and appliances than the structure of your home.
This balances out though, with lower premiums and far lower deductions. A $40 monthly payment with a $75 service call is a great deal if it means your plumbing,HVAC, and kitchen appliances are all protected. Not just protected, but also repaired within a reasonable timeframe by a professional technician.
Its wise to have both areas covered, especially if you rent out an apartment or have Airbnb guests. This increases your risk of having a fire or theft, as most would agree, but what we rarely think about is how it also increases the wear and tear of appliances and reduces their lifespan.
Life Span Of Typical Home Appliances
While it is a basic necessity to have homeowners insurance, a home warranty is at your discretion based on the age of the systems and appliances within your home. If youre unsure of the age of or when things were last replaced, its a good idea to take out the warranty to be safe. Here is an idea of what the lifespan of a few items run:
- Refrigerator 14 years
- Water heater Between 8 and 12 years
- Dishwasher 12 years
- Electric range 16 years
- Central A.C. Approximately 15 or 20 years
The plus with having home warranty is that the providers generally have a list of licensed contractors that they use for their work so you know youll be getting a reputable, reliable person to take care of your equipment.
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How Is A Home Warranty Different From Homeowners Insurance
Homeowners insurance and home warranties are both designed to help safeguard your home, but they each offer different types of protection. A home warranty is an excellent supplement to a homeowners insurance policy, and a homeowner should consider purchasing both.
What is homeowners insurance?
Homeowners insurance covers loss and damage to your home or belongings caused by certain perils such as fire or flood. Most mortgage lenders require a homeowners insurance policy as a condition of granting the home loan.
What is a home warranty?
A home warranty is a service contract that covers the costs associated with common home system and appliance failures.Savvy home sellers and buyers understand the value a home warranty provides both before and after the home sale. Home systems and appliances dont last forever, and a home warranty plan offers plan holders convenience, budget protection, and peace of mind.
Homeowners insurance and home warranties work together
Lets say a dishwasher leaks in your kitchen, all over your new hardwood floors. While homeowners insurance may cover costs related to the water damage, a home warranty would cover the dishwasher breakdown.
How Does A Home Warranty Work
Let’s say its the middle of the summer and your HVAC system stops working. Just file a claim online, and a qualified contractor will be sent to your home to assess the problem. If it’s determined that the system is no longer working because of age or wear and tear, and the breakdown is covered under the terms of your service contract, the contractor will make the repair. If it is beyond repair, they will replace the appliance or system component for just the cost of your Trade Service Call Fee. American Home Shield pays the remaining amount for the repair or replacement based on the plan that you have selected and subject to contract limitations and exclusions. Its as simple as that!
Regardless of the differences between a home warranty vs. home insurance, lets face it: life happens, and things break down. Purchase both types of policies to fully protect your home and your wallet. No matter what, American Home Shield is here to help your household run smoothly.
AHS assumes no responsibility, and specifically disclaims all liability, for your use of any and all information contained herein.
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What Do Home Warranties Not Cover
If a specific item is not included in the basic warranty plan, and it needs to be, then a customized warranty might be a sensible investment. The cost of an enhanced plan, with its broader range of coverage options, can cost an additional $100 – $600, on top of the standard plan.
Some of the systems and appliances that are not typically covered as part of a standard or common plan are:
- Plumbing fixtures
- Home entertainment system
- Wine cooler
Also, its important to know that most home warranty companies will not cover any pre-existing defects or damages, meaning that if your item was broken or not working before you purchased the warranty, the company will not pay to have it fixed. As this can sometimes be difficult to figure out, we recommend having a company that makes their contracts easy to understand.
In addition, there are a number of other potential loopholes you should be aware of. For example, some companies will not cover damages made by animals, or problems stemming from improper system installation, or any malfunction they conclude was caused by poor maintenance.
So make sure to read the fine print and know exactly what the warranty will cover and for how much before signing your contract.
Compare Popular Home Warranties And Home Insurances
Homeowners insurance may cover losses to covered property caused by:
Weather: Storms, fire, wind, hail, lightning, freezing of a plumbing system, weight of ice, snow or sleet
Non-weather: Theft, vandalism, riots, aircraft and vehicles
Accidental Direct Physical Loss:Water from plumbing, tearing/bulging of heating or cooling systems, artificially generated electrical current
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Reasons To Have Home Warranty
Should I have a home warranty? Short answer: yes. By having one, youre protecting yourself against unexpected problems and expensive repairs. Here are some reasons why it is more convenient to have a home warranty plan.
If you are settling into a new house, you may expect everything to work perfectly. However, its possible that problems may go unnoticed during an inspection or tour, leaving you with non-functional pieces of equipment that could cost you money on repairs down the road. Getting a warranty for your home prevents you from having to worry about randomly repairing something that is not operating.
Protect Your Budget and Save Money
Budget protection is one of the largest reasons why you should have a home warranty plan. Home warranty policies cover appliances and systems from unexpected failures, while homeowners insurance protects your home structure from damage. Another reason for having a home warranty is that they also help save money. The most vital appliance in your home will need a repair at some point, and it will undoubtedly be expensive if it isnt included in your home warranty package. In the event that you need to pay for the repair with a home warranty, you only have to pay the service fee.
Having Budget-Friendly Coverage
Saving Time and Energy
Home warranty coverage allows you to relax while your provider does the hard work. In addition, technicians sent to help are licensed to provide the best service.
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A Home Needs Both: A Home Warranty And Home Insurance
Homeowners need both home insurance and a home warranty on their home to protect the structure and the homes systems and appliances. If there is damage done to the structure of the house, the owner won’t have to pay the high costs to repair it if they have home insurance. If the damage to the home’s structure or homeowner’s belongings was brought about by a malfunctioning appliances or systems, a home warranty can help to cover the costly repairs or replacement if the system or appliance has failed from normal wear and tear. If you have a home, consider purchasing both a home insurance policy and a home warranty. They will work together to provide protection on every part of your home.
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