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A home warranty is a contractual agreement provided to an owner of a house by any of a number of different types of entities such as home builders, risk management groups, or others. In the strictest legal sense a warranty of any kind within the United States must adhere to guidelines set at the states' and federal government's levels. But the words are not always used explicitly to mean a legal warranty is being conveyed. In many cases, at least in the United States, a home warranty is not a warranty at all but rather a home service contract that covers the repair and/or replacement costs of home appliances, major systems such as heating and cooling, and possibly other components of a home, structural or otherwise. The home service contract generally covers equipment and appliances, such as dishwashers, plumbing systems, and electrical systems, that fail due to normal wear and tear. Coverage varies significantly across home warranty companies. Home warranty contracts do not cover all home repairs.
Basic coverage includes plumbing, electrical, heating systems, and major appliances such as refrigerators, dishwashers, and ovens. Many companies charge additional coverage for appliances such as clothes washers and clothes dryers, which are generally not covered. Buyers should read the home warranty contract carefully to understand coverages, limitations, and exclusions.
In some states, such as New Jersey for example, builders of new homes are required to provide a home warranty to those purchasing homes. Though the terminology is identical, these home warranty plans differ from the ones offered to existing home owners or through real estate transactions involving the purchase of existing homes. The coverage may be very different from other similarly named agreements.
Home warranty is one of several terms for a contract between home owners and companies that cover some of the costs associated with specific repairs and replacements of household objects. Related industries often use such terms as residential service contract and appliance warranty plan. Just as is the case with home warranty in states such as Florida, residential service contracts are regulated in some states such as Texas. It is of value for consumers to understand their state's regulations for companies that offer to provide maintenance or repair services and/or coverage for related costs since some companies may be operating without proper licensing. Consumers may sometimes avoid falling prey to unlicensed companies by consulting their state's policies and other information regarding home warranty and similar services. In some cases current lists of licensed companies are available for consumers to check on the applicable state government agencies' websites.
In the United States, annual premiums generally range from $300 to $450 USD. There will be additional service trade fee (deductible) of 50 to 100 dollars per service incident. Most companies do not let homeowners combine two repairs with one service trade fee. For example, if your electrical switch needs a repair and kitchen sink is clogged, you will have to pay the service trade fee twice.
Some common complaints that home warranty clients have:
Home warranty companies deny systematic denial and claim that customers need to pay close attention to the contract. Warranty contracts specify that pre-existing conditions and problems arising due to lack of proper care and maintenance are not covered.
Buyers are encouraged to check the provider ratings of the companies selling the product.