Will home repair insurance cover appliance failures?
Shannon Dauphin | Improvement Center Columnist | March 12, 2012
When you buy homeowners insurance for your new home, you might not think about things like the washer and dryer. But when one of those much-needed appliances goes haywire, the cost of repair or replacement can start to pile up and quickly make a big dent in your savings account.
Home repair insurance for appliance breakdowns
Also known as a home warranty, this type of home insurance is designed to cover things that other policies don't--systems such as air conditioning, heating, electricity and plumbing, as well as major appliances, from that old refrigerator to the hot water heater.
Some warranty policies can cover a wider range of items, such as ceiling fans, built-in microwave ovens and garage door openers. However, each item must be in good working order at the start of the warranty, and must have no pre-existing issues.
Most home warranties are written for a term of one year and can be renewed indefinitely. Expect a reputable company to charge between $250 and $400 per year for the policy, in addition to the usual $35 to $50 fee for a service call if you use the coverage.
Insurance for home repair: buyer beware
Is a home repair warranty really worth the money? If your home's systems and appliances are starting to show their age and are no longer under the manufacturer's warranty, mounting repair bills could become very costly. In that case, this insurance might be an excellent idea.
But when choosing a policy, be certain what is covered and what is not. "What is most important about home repair insurance is that you take the time to read the fine print," says "Fraud Dog" Linda Webb, a leader in the fraud and investigative industry. Here are nine things to question before you put your signature on the contract:
- How much is a service call?
- Can you choose your own contractor, or do you use one chosen by the warranty company?
- Does the contract cover emergency situations?
- What exactly constitutes a "pre-existing" issue?
- Is there a dollar limit on certain repairs?
- Is there a limit to how many claims you can file?
- Do you have to file a claim manually?
- How long does it take for a claim to be processed?
- Do you have to pay the full amount up-front and be reimbursed, or is only payment for the service call required at the time of repair?
It could also be beneficial to choose your own policy rather than accept the one recommended by your real estate agent at the closing of a sale. A recent lawsuit filed against popular warranty service, American Home Shield, pointed out that realtors can receive commissions from the sale of a home warranty product, which can potentially make those recommendations questionable.
In the end, a home warranty might never be used, but it can offer peace of mind. "Trust that most of these types of programs are like dental insurance," Webb advised. "Just mostly preventative, but in the long run, not really sure it is worth it."