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How to Choose a Home Warranty Plan

Check out our guide to finding the perfect home warranty for your residence.

Last Updated: November 5, 2021

When it's time to choose a home warranty plan, it's important to ask the right questions and read the contract. This guide will help you make an informed decision about home warranties and get the most out of the warranty plan you choose.

1) Get Clear About What the Warranty Covers & Excludes

No home warranty plan covers everything. And there is a limit to how much they can cover based on the plan you choose. On your side of things, you don't want to end up paying out of pocket for something they agreed to cover, devaluing your plan. So, it pays to learn about what you're paying for and to ask questions if anything is unclear.

When you look at terms of service, you may see a long list of coverage exclusions. However, when you start looking at what the coverage excludes, it becomes clear why some things get excluded.

The general premise of home warranty is coverage for unexpected breakdowns in systems or appliances from normal wear and tear. If we take a broken dryer as an example, a dryer door hinge is typically excluded from warranty coverage because damage is typically caused by user error rather than malfunction. If the heater or circuit board gives out, however, that is typically a covered repair.

Understanding what each home warranty plan covers will also help you choose the right plan to meet your needs.

2) Check the Reviews

Online reviews are now essential to the buying process. Look at reviews holistically. You'll always have that handful of people who didn't read their contract and ended up unhappy. But as a whole, you should see good reviews that mention on-time technicians, repaired appliances, paid claims, and overall great customer service.

3) See if You Already Have Protection

Homeowner's insurance doesn't cover home appliances. Insurance policies generally cover losses from burglary, storms, floods, and fire. If you do have a "flood" that's the result of a water heater that should have been fixed, homeowner's insurance also won't pay for it.

Some appliances have extended warranties. These often guarantee repairs for replacement if something goes wrong with an appliance that was purchased within the last several years.

4) Consider How Much Wear and Tear Your Appliances Have Now

Appliances serve one purpose--to do the repetitive, grueling, dirty work you'd rather not do. If you use your appliances in normal ways, chances are there are major components that will break over time. You want to make sure the plan you choose covers those likelihoods.

5) Evaluate any Pre-Existing Conditions

If your dishwasher is 15 years old and running well past its expiration date (9-12 years), chances are it's not running at its best. Take inventory of the ages and life expectancies of your appliances as well as any known problems they have, and consider any exclusions. These exclusions are rarely deal-breakers. But you'll want to know what they are up-front.

6) See if Cosmetic Damage is Covereds

The purpose of home warranties is to cover home repairs, usually appliance repairs. Your contract will outline what it covers when you choose a home warranty plan. But if cosmetics are important to you, you may want to look for a plan that would cover if a child threw a football in the house and dented the refrigerator door. Some plans may cover such damage.

7) Find Out What Your Per Incident Service Fee Is

Home warranty plans often have a per-incident service fee. You can think of this as a copay on your health insurance. These service fees help the warranty plan keep the overall costs low for their clients and reduce fraud or abuse. These service fees typically range from $50-150 per incident, depending on the plan you choose.

Notably, if you hired a technician on your own, you'd be paying this fee solely to have them come check it out. But with a home warranty, if the service is covered, that's probably all you pay.

8) Understand the Repair or Replace Guidelines

Some plans will have a repair or replace clause. If the repairs exceed a certain percentage of the value of the appliance, they may purchase a new or refurbished one or pay you a certain amount of money based on the depreciated amount.

Keep in mind: Just like your car, appliances depreciate, so if you choose the cash option, the replacement value may not equal the original amount you paid for the appliance.

9) Know The Limits

Similar to insurance, home warranty plans often have limits on how much they will pay out in one year. These capped amounts are generally reasonable and well exceed the amount of claims that an average household should expect.

The average cost of a home warranty plan is $25 to $60 a month, and generally, the more you pay, the more coverage you have.

10) Compare Plans

With these tips in mind, see our list of top home warranty plans to start choosing a home warranty plan that works for you.