Home Warranties: What’s Covered, Whats’s Not, And How To Save Money

June 22, 2022

When it comes to protecting your investment, a home warranty can really save you a lot of money if something goes wrong. Andrea Bologna is a home warranty specialist with First American Home Warranty in the San Francisco Bay Area. I recently had the opportunity to talk with her about the importance of a home warranty and learn more about what it can do for homebuyers. Her job is to help make sure homebuyers are protected, and she can help customize a plan to best fit your needs.
What is a home warranty?
As Andrea explains, a home warranty is essentially a service contract. It covers the appliances and systems in a home for the first year after closing escrow. For example, if you have an appliance or system break, you put in a service request through the First American homeowner’s portal or you call their service department. Instead of hiring your own technician, the home warranty company uses their own network, with pre-negotiated rates for equipment and labor.
How does a home warranty work?
For an $85 service fee, the contractor comes to your property to assess the problem. If it’s covered by the home warranty, they try to repair it. If this isn’t possible, you receive a replacement, “like for like” unit. This means the warranty company matches features, function, and capacity to the previous appliance or system in your home. This doesn’t necessarily mean the same brand. The homeowner also has the option to take a “cash-out”. This is money you can then use to go out and purchase a new appliance or system on your own.
What’s covered?
Not everything is covered by a home warranty. It’s important for homeowners to know this. While appliances and systems are covered, structural items are not. For example, if you have a leak that damages your hardwood floors, the home warranty may cover the cost to repair the leak, but not necessarily cover any secondary damage, such as buckled flooring caused by the leak. 
What are the different levels of coverage?
First American Home Warranty offers three levels of coverage. The first is Basic Coverage, followed by what it calls its Value Plus Plan and its Eagle Premier Plan. There’s room for customization and for adding on to your policy, as well. 
What’s recommended?
Above all, Andrea recommends what First American calls its First-Class Upgrade. It’s already included with the company’s top two-tier plans. Essentially, the First-Class Upgrade helps reduce any out-of-pocket costs if you end up needing a larger system, such as a water heater or an HVAC system, replaced. Andrea says a First-Class Upgrade covers up to $250 in code modifications, up to $250 in permit fees, and it covers the cost of hauling away the home’s old unit. This can potentially save you hundreds of dollars if you have a problem.
There are also some optional add-ons. Andrea says the First-Class Plus option is similar to the First-Class Upgrade, but it boosts the amount from $500 to $1,250. This is probably a good idea if you have an older HVAC system, an older heating system, or an older water heater.
The Plumbing Plus option may be useful if you have a lot of trees on your property, which means you could have trouble with root damage to underground pipes. Without this add-on, your plan would not cover plumbing damage caused by tree roots. With it, you’re covered up to $250 for the repair of the portion of the pipe broken by tree roots.
What about brand-new homes?
According to Andrea, a brand-new home warranty is a bit different than a standard warranty. Instead of starting in year one, it starts in year two. It then covers years 2-5, which is after the builder and manufacturer warranties expire. As long as you have a manufacturer’s warranty still in effect, that is what supersedes any home warranty. 
Ways to take advantage of a home warranty
Andrea says claims involving dishwashers, heating systems, and water heaters are all common. She adds, that whether the appliances are old or just a few years old, a home warranty can be useful. Again, there is a “cash-out” option.
As Andrea explains, it’s not unusual for people to put in-home warranty claims. In the first 90 days alone, she says about 28 percent of homebuyers end up placing a claim. Over the first year, she says more than 50 percent of people end up with a major appliance or major system that breaks in the home. 
Andrea says there are lots of ways a home warranty can help reduce your liability when something does go wrong. Keep in mind, that many home warranty policies are paid through escrow at closing. There are also some possible discounts you may qualify for, so that’s something to consider. 

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