Below are some common questions and
answers about Home Warranties:
Q: What is a home warranty/home
service contract?
A: A home service contract provides
service, repair or replacement on a home’s major systems and appliances
for a usual term of one year.
Q: What triggers my coverage?
A: Generally, any failure of your
covered home appliance or covered home system that fails due to normal
wear and tear.
Q: What does a contract usually cost?
A: Contract fees vary from provider
to provider and region of the country. The expected cost for a basic
contract might be from $350 to $500 per year.
Q: Is there a house call or service
charge?
A: Currently one may find a range
from approximately $35 to $100 depending on your area of the country.
Q: What are appliances and systems?
What is actually covered?
A: Basic and optional coverage
varies from company to company with some regional variances. Home service
contracts are specific and do not include everything in your house and
most do not cover home foundations, walls, structure or finish. Typical
covered systems and appliances generally include:
· Interior Plumbing
· Heating System
· Electrical System
· Water Heater
· Ductwork
· Dishwasher
· Oven/Range/Cook-top
· Garbage Disposal
· Garage Door Opener
· Air Conditioning (may be found as an option)
· Refrigerator (may be found as an option)
· Washer/Dryer (may be found as an option)
· Pool Equipment (optional)
· Spa Equipment (optional)
Q: Are home service contracts
insurance?
A.: NO. Insurance policies undertake
to indemnify or pay economic dollar loss for damage or liability from
unknown or fortuitous events. Insurance pays when appliances or homes are
damaged from perils such as fire, water, flood, windstorm, collision or
outside forces causing breakage from an accident, such as a tree falling
on your house. Insurance covers your dollar liability to others when you
are accused or found liable for an accident, negligence or damage to
others or others property. Insurance never pays for breakdown of goods or
property from normal wear and tear. In this sense, home service contracts
are the exact opposite of insurance. Home service contracts compliment an
insurance plan, they do not substitute for one.
Q: Is there any cross over between
home service contracts, insurance and home structures or construction?
A: Not normally. In rare instances
when common sense alternatives do not exist, a home service provider may
offer some incidental cash payment in lieu of repair or replacement. For
example, your condenser has failed on your air conditioner and can be
repaired, but the technician discovers your house has other defects and
electrical code deficiencies. You determine a remodel and a new electrical
service and infrastructure is overdue and required. It may make better
economic and practical sense for a cash settlement to apply to your
overall remodel. All states but Virginia (which presently license home
service companies as insurers) would allow this incidental cash payment
without it being considered insurance.
Some home service companies provide
coverage if damage is caused by an electrical surge. This is because
failure of an appliance can be from internal electrical failure, power
company supplied surge or even lightening or a combination of all three.
Damage may be covered by your homeowners insurance and should be consulted
first. However, state insurance regulators allow such incidental coverage
by non insurance companies because disallowing the coverage would upset
most consumers as electrical failure can be hard to pinpoint its cause.
Some home service companies may
provide optional “roof leak coverage.” Roofs are technically structural
components of a home but they are most often recognized as a system to
prevent water and rain from entering a structure. Homeowners insurance may
cover hail damage or fire loss to a roof and may cover consequential
damage to contents from a sudden and fortuitous leak, but they do not
cover routine, slow and pesky leaks. As a result, a growing number of
states specifically authorize home service companies to provide this
needed consumer service.
Q: Are these the same as maintenance
agreements like my heating and cooling contractor offers?
A: NO. Maintenance agreements are
much more limited. While they may provide service or reduced cost of
repair, they typically do not include full repair costs and do not include
replacement. They are typically limited to one appliance or product. They
are often offered by heating, ventilation and cooling (HVAC) companies.
Their prime function is to inspect and service your system once or twice a
year and simply point out repair needs. Home service contracts cover a
wide selection of home appliances and systems and include full replacement
if required.
Q: When is the best time to buy?
A: Anytime. Home service contracts
by their nature cover existing (“used”) appliances and household systems.
Appliances and household systems by their electrical or mechanical nature
will wear out. You may never experience a house fire or car wreck, but
your dishwasher will malfunction or wear out. Many appliances have very
predictable life spans.
Home service contracts have
traditionally been purchased by a HOME SELLER for the benefit of a HOME
BUYER for the first year after a home sale. Why? Buyers are more assured
to buy a home knowing they have peace of mind against major appliance and
system failures. Real estate agents almost always recommend a home service
contract. Home sellers find the cost very minor in relation to the house
sale and both seller and agent rest easier knowing the buyer will not be
calling them when something fails.
Almost anyone can buy a contract on
their own home, today. With the growth of two income earner families and a
larger senior population, many homeowners find an annual service contract
does what they cannot do---provide the expertise and time to fix things
around the house right and right away. It also provides everyone a more
predictable repair budget. With so many families relocating every three
years, few have time or confidence to find good, proven plumbers or
heating and cooling technicians and electricians in their new
neighborhoods. A home service contract gives them one simple 800 number to
call to provide guaranteed service by proven and reputable professionals
in their community.
Q: What are some typical limitations
found in home service contracts?
A: Home service contracts cover the
repair or replacement of a home’s major systems and appliances that break
down due to normal wear and tear during the term of the contract.
Therefore, items that are not typically covered include:
• Preexisting conditions that existed prior to
the effective of coverage.
• Items that fail due to an occurrence other than normal wear and tear.
Consequential damages caused by the failure of the system or appliance
are not covered. Your insurance may apply.
• Items not mentioned as covered in the terms of the contract.
• Items that were improperly installed, modified or where the damage was
the result of or worsened by, an attempted repair or remodeling.
For more information visit:
Home Service Contract
Association:
www.homeservicecontract.org
Service Contract
Industry Council:
www.go-scic.com
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A
Home warranty is a service contract that covers the repair and
replacement costs of home appliances. The warranty generally covers
equipment and appliances such as dishwashers, plumbing systems,
electrical systems etc. that fail due to normal wear and tear. Coverage
varies significantly across warranty companies. Home warranty contracts
do not cover all home repairs.
