It’s important when buying a new home to not confuse home warranties offered by companies such as First American Title with a home warranty offered by builders, which guarantee the quality of the new-home construction itself, not the systems or appliances inside. While your home service contract will cover those appliances, most don’t cover home foundations, walls, structures, or finish.
While these contracts may seem like the ideal option when buying an older home, homeowners need to carefully read the fine print to avoid some loopholes—home service contracts are very specific.
Here are some things to watch out for, and what not to do because it could void your coverage:
• A mechanical failure that existed before the agreement was effective. Say, for instance, that the air conditioning hasn’t worked for five years. Summer comes around and the new homeowner tries to start it, only to realize he’s out of luck. In this case, repairs or replacement might not be covered. (Several firms do offer different levels of coverage that could cover your home’s preexisting conditions.)
• A failure not caused by normal wear and tear. If the family pet is using refrigerator coils as a chew toy, or if a raccoon has taken up residence in the air-conditioning unit, those repairs would not be covered.
• Inspectors finding asbestos, hazardous or toxic materials, or mold.
• Faulty workmanship on your appliances. Carefully research technicians. Check with the Better Business Bureau before choosing one to make sure it is a reputable company. Do not tackle any job on your own that you are not qualified for.
• An appliance has clearly been mistreated.
• Calling a repairman before the home warranty company gives approval for a repair or replacement. Always consult with the warranty company first.
• Changing the property use from residential to commercial. If the homeowner decides to convert the home into a beauty salon, the contract would be voided.
Follow these tips to get the most out of your home service contract:
• Make sure all appliances are installed properly, including those installed by a trained technician. Again, check with the Better Business Bureau if you are not sure about a technician.
• Take care of routine maintenance. Don’t let rust run wild. An annual maintenance plan for air conditioning and heating is a good idea; you can avoid the rush in summer and winter when everyone else needs help.
• Make sure multiple appliances are covered. Yes, your kitchen refrigerator is covered, but what about the backup fridge in the garage?
• Find a quality home inspector. This person will make sure everything is running the way it should before you finalize the home purchase.
• If you have a problem, remember to call your home service contract company before you call a contractor. The warranty company will not pay for a claim unless you call them first. They may suggest a contractor or let you choose your own, depending on the company policy.
• If a claim is denied, don’t take “no” for an answer. Carefully review your policy and then ask to talk to a manager. Find out what has happened with similar situations to get the problem resolved.
Visit the National Home Service Contract Association for a complete list of all registered companies. The website also includes a consumer section for fraud reports or complaints.
Credit: Popular Mechanics