Home Warranty Basics

repairman doing screw drilling

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Whether you’re a homebuyer or seller, a home warranty can give you peace of mind. Also known as a home service contract, the home warranty typically covers mechanical systems and built-in appliances in the home.

Not to be confused with homeowner’s insurance, which covers damage from external forces, home warranties are designed to fill the gap between the original manufacturer’s warranty and normal wear and tear, according to HomeServiceContract.org.

Here’s how it works. If your AC goes out, or your dishwasher breaks, you contact the home service company and describe the problem. The dispatcher will send the appropriate licensed plumber, electrician, or appliance repair specialist to service the call. Expect to pay a service fee of about $50 or higher for each visit.

Remember that home warranties don’t provide blanket service. They don’t cover repairs or replacement for pre-existing conditions or for elderly mechanicals that are beyond their useful lifespan. But they are good for emergencies if your toddler clogs the toilet trying to “wash” his teddy bear.

For home sellers, home service contracts improve the home’s marketability to homebuyers and diminishes liability. For buyers, warranties can absorb the costs of unexpected repairs or replacements. Extended coverage for non-built-ins such as clothes washers, dryers, and stand-alone refrigerators is usually available.

When you think about the wide range of systems and appliances that it takes to operate your home, a home service contract is a bargain at approximately $400 to $500 and could pay for itself with one use.

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