Home Appliance Insurance: Why You Need it?

Buying a new home can represent a milestone or a much-needed change. However, regardless of the age of the home, all home purchases come with risks. While newly constructed homes and some resales come with home warranties, many existing homes do not.

Purchasing a home warranty for your major appliances and home's components can reduce repair and replacement costs and give you peace of mind knowing you'll be prepared if a major malfunction occurs.

Contrary to popular belief, home warranties can be purchased by homeowners who have already been living in their homes for a while. Different types of home warranties exist and vary according to the length and scope of protection.

If protecting your appliances is your only objective, the home warranty plan doesn't need to cover things like plumbing or electrical systems in the house. Here's a breakdown of the different types of home warranties, what they cover, and why it's a good idea to get one.

Do I Really Need a Home Warranty?

There's a reason why builders usually include a one- to three-year home warranty in a home's purchase price. It helps protect them from legal ramifications if something goes wrong with the construction of the home or the appliances in the home fail. In fact, new appliances are 20 percent more likely to fail within the first four years than older appliances that have been in use. It's even possible for a major appliance, like a furnace, to have a problem or defect upon install.

The average cost of repairing and replacing faulty appliances like hot water heaters and HVAC systems can set you back several thousands of dollars. A home warranty can cover the costs of repairing or replacing these components when needed.

While you may be able to go without a garbage disposal or a functioning automatic garage door for a while, an HVAC failure can be an emergency. Home warranties ensure that you'll be able to make repairs or replacements immediately, without having to dig into your savings or use credit to pay for the costs.

Costs of home warranties can be less than taking out individual warranties on each appliance. With 68 percent of homes experiencing some type of malfunction or breakdown each year, taking out a home warranty can reduce your overall ownership costs. It can reduce the amount you'd have to spend on repairs or replacements for each breakdown or malfunction that occurs. Taking out separate warranties not only becomes more expensive, but the coverage options and length of coverage can vary, leading to confusion.

Types of Home Warranties

Home warranties typically vary by length and scope. The average length of coverage can be between two and ten years. However, it is possible to have a slightly shorter or longer warranty. A home warranty is more comprehensive than individual appliance warranties, as they cover an entire range of appliances or all of a home's major systems and add-ons like wine coolers.

Home Appliance Insurance

If you're worried about whether a home warranty's length will exceed the amount of time you live in your house, check with the provider about transfer options. In some cases, the warranty can be transferred to another home or a new owner of your existing residence. There may be additional costs involved to complete these transfers, but it can prevent objections to purchasing a protection plan that may outlive your use of the home.

Lower-cost plans are usually shorter in the length of coverage time and less comprehensive in the scope of protection. Basic plans may only cover the appliances in the kitchen and your washer and dryer. More comprehensive plans cover all appliances, the HVAC system, and the home's plumbing and electrical systems. Even more comprehensive plans allow you to add on protection for second refrigerators, well pumps, roof leaks, and hot tubs.

If you're purchasing new construction, you'll want to check with the builder to see what the built-in home warranty covers and how long it lasts. In some cases, you may want to purchase an extended or separate policy. Sometimes, this is an option with the builder but adds to the purchase price of the home. Other times, you'll need to look for another warranty provider once your initial warranty with the builder ends.

While it is rarer for a resale to include a home warranty, it does happen. In buyers' markets or homes that are more likely to experience problems due to age or other factors, sellers will include home warranties to increase the chance that their home will sell. If you do happen to enter into a contract where the seller is including a home warranty, be sure to see if the transfer costs are included in the purchase price, what the warranty covers, and for how long.

Doesn't My Insurance Cover Mishaps?

Most homeowners' insurance policies do not cover malfunctions with appliances or plumbing systems. In fact, most will only cover damages or destruction related to extreme weather and vandalism. For instance, if a hail storm damages your home's roof, your insurance policy will cover the repairs or replacement if you file a claim within a certain amount of time following the damage. You will probably need to pay your policy's deductible before your policy kicks in and may need to provide proof of the damage from a licensed contractor or one of the insurance's representatives.

For the most part, insurance policies will protect damage to or loss of your personal property within the home. Policies will also cover medical costs related to accidents that third parties sustain on your property. For example, a guest may slip and fall on ice on your walkway.

Your policy will likely cover the guest's medical expenses related to the fall provided there was no proof of gross or willful negligence on your part. Insurance policies, however, view the upkeep and repair of the home's appliances as the responsibility of the homeowner.

Purchase a home warranty can give you several advantages. It streamlines the protection length and coverage for all of your home's major appliances and systems. You'll end up saving more money over time and gain peace of mind.

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