Homeowners insurance covers many perils, but it doesn't cover damage that isn't sudden or accidental. If your refrigerator or plumbing gives out because of old age, it's likely excluded from your policy. You'd have to cover the cost of repair or replacement out of your own pocket.
Home repair insurance can come in handy in this situation. Also known as a "home warranty," "home protection plan" or "home appliance insurance," this coverage picks up the slack and covers select systems and appliances for damage resulting from age or general wear and tear. Some home repair insurance plans cover other parts of your home, too, like your roof.
This article covers
What home repair insurance does
A home warranty policy covers certain systems and appliances for damage that occurs due to old age and general wear and tear.
You may wonder why you need a home warranty policy if you have a home insurance policy. Plain and simple, home insurance only covers damage caused by sudden or accidental damage. Did your pipes freeze and burst? Your home insurance has it covered. Did the pipes crack because they're old? Insurers consider that avoidable with proper home maintenance and therefore exclude it. That means you have to pay for it. If you have home repair insurance, though, it would repair or replace systems or appliances that stop working due to age.
What a home warranty plan covers depends on the plan you choose and where you buy it. Most basic home warranty plans cover:
- Washers and dryers
- Built-in microwaves
- Garbage disposals
- Ceiling fans
Many home warranty providers offer higher-priced plans that cover pricier items like air conditioners and plumbing and electrical systems. American Home Shield, a prominent home repair insurance company, offers coverage for roof leak repair as well.
Due to the diversity of coverage that home repair insurance companies provide, pay attention to the dollar limit of coverage each one provides when comparing companies. When replacing a broken appliance, companies typically make sure you get a replacement with the same features, but it may still be a cheaper model than what you originally had. If you have an expensive oven and a policy has a low maximum payout limit on its replacement cost, you might want to keep looking.
Some home warranties allow you to pay the difference between a policy's maximum payout and the cost of an equal replacement of your current appliance or system. However, in the long run, it could be much cheaper for you to find a home repair insurance policy with a dollar limit better suited to your belongings.
Do I need a home warranty?
Whether or not you need a home warranty depends on the age of your appliances. If you recently moved into a newly-built home, purchasing a home warranty probably isn't necessary. Your appliances should still be under a manufacturer's warranty, or at a low enough risk for a home repair insurance plan to be cost prohibitive.
On the flip side, if an appliance, such as a refrigerator, is getting toward the end of its life cycle, you might want to consider a home warranty plan. Replacing a refrigerator can easily cost more than a home repair insurance policy for a year. Having it and all the other appliances a basic plan covers protected for a year could be well worth it.
To get and keep a good estimate of the age of your appliances, add them to the inventory list you keep for home insurance purposes. This can help you stay up to date on the age of your appliances, as well as the ongoing risk of a breakdown.
How does a home repair insurance policy work?
The process for using your home warranty is fairly similar across companies. If you need to file a claim:
- Call your home repair insurance provider when a covered item breaks down. Many companies have an online form to make this simple.
- Your home warranty provider will find a local licensed contractor in their network to help you. Some insurers allow you to use your own contractor, but there may be a delay for an authorization.
- The authorized contractor will contact you to set a date and time to inspect and diagnose the problem with the appliance.
- The contractor will attempt to repair the appliance to functional capacity. If it cannot be repaired, they will alert your home repair insurance provider, which will then start the process to have your appliance replaced.
Almost all home repair insurance companies charge a service fee for a visit to deal with a claim. Whether you pay your service fee at the beginning or end of the claim process depends on the company.
What are the top home warranty companies?
Based on our research, we've found American Home Shield, America's Preferred Home Warranty and Choice Home Warranty to be the best. Here's why:
American Home Shield: best overall value
American Home Shield has excellent overall coverage for warranties that start at $39.99 a month with a $100 service fee. On top of plans that cover 23 different home systems and appliances, all of its plans also cover:
- Pre-existing problems.
- Improperly repaired, installed or modified systems and appliances.
- Breakdowns due to poor maintenance.
An American Home Shield warranty is not available in Alaska, parts of New York City and Oahu, Hawaii.
America's Preferred Home Warranty: most states covered
America's Preferred Home Warranty coverage is available in all states except Illinois. It prides itself on letting their home repair insurance policyholders choose their own contractor for a job, although there could be a delay of service if you choose an unauthorized contractor.
America's Preferred Home Warranty plans cover up to 24 systems and appliances, with plans ranging in cost from $39.58 a month with a $125 per visit service fee to $46.58 a month with a $50 per visit service fee. Its plans do not cover pre-existing problems.
Choice Home Warranty: best basic plan
Choice Home Warranty offers a comprehensive basic plan covering 14 systems and appliances that costs $46.83 a month with an $85 service fee. Choice Home Warranty offers coverage in all states except Washington.
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