Exploring the Different Types of Home Warranties

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Home warranties can make covering the cost of system and appliance repairs and replacements more manageable. For example, on average, replacing an HVAC system can run between $3,000 and $6,000, which is more than many homeowners can shoulder unexpectedly. Even tackling a water heater replacement can run between $836 and $1,682, making it a potential budget buster if you don’t have much in savings.

However, it’s critical to understand that home warranties don’t all work the same way. Here’s an overview of the different types of home warranties and what they usually cover.

System Plans

A home warranty system plan is specifically designed to cover wear and tear-related failures for whole-house systems. Generally, that includes your HVAC, plumbing, and electrical systems. Additionally, it usually covers related or specific connected equipment, such as water heaters, garbage disposals, and ductwork. At times, garage door openers are also considered a system component, though that isn’t always the case.

As with any policy, whether various systems are included can vary. Some home systems may require an add-on. For example, while your plumbing is usually managed through the base policy, pool equipment isn’t typically included without an appropriate add-on.

However, system plans don’t cover any aspects of the home’s structure. That means you won’t have a service contract for your roof, foundation, or walls. Still, if those areas are impacted by a home system repair – such as the need to tear into a wall to reach some plumbing – the cost to restore the structure is typically covered by the service agreement.

Appliance Plans

A home warranty appliance plan focuses on repairs and replacements for major appliances. Typically, that includes refrigerators, stoves, cooktops, ovens, dishwashers, clothes washers, clothes dryers, built-in microwaves, and similar appliances. In some cases, garage door openers also fall into this category.

Precisely which appliances are covered does vary by policy. As a result, you want to review the details of the coverage to see if every appliance you want to have included is listed or if some require add-ons, which does occur.

However, regardless of whether you’d like the coverage, small countertop appliances – including items like blenders and toasters – are not eligible. Additionally, features like built-in coffeemakers are usually excluded from the plan.

Along with repairs and replacements for covered major appliances, these plans usually handle the cost of disposing of broken appliances that are removed. Additionally, the installation of covered built-in appliances is potentially part of the service agreement.

Combination Plans

With combination home warranties, the coverage usually includes home systems and major appliances. Essentially, this is a comprehensive option, eliminating the need for separate policies to handle repairs and replacements for appliances and home systems.

In some cases, combination plans cost less than getting individual plans to handle each area. Essentially, it works on a bundling principle, which can lead to a slight discount. However, whether that’s the most affordable option varies. You may find better separate-home-warranty pricing by using more than one company, so keep that in mind.