Understanding Your Home Warranty Contract: What You Need to Know

The terms and conditions of a home warranty are outlined in a home warranty or home service contract. Policy holders should thoroughly review their contract to understand coverage stipulations, costs, and other important information. Homeowners who are pursuing home warranty coverage for the first time should also be mindful of what a contract or homeowner’s user agreement entails.

In this article, we’ll review the information and conditions you can expect to find in a warranty contract.

What Is a Home Warranty?

A home warranty is a service agreement between a homeowner or home representative and an independent policy provider. The homeowner or representative pays a monthly or yearly premium, and the policy provider in turn agrees to cover the repair or replacement of certain home appliances and systems.

There can be substantial variety from plan to plan, but a home warranty at its core is an affordable means of maintaining critical—and often expensive—home equipment.

Home Warranty Vs. Home Insurance

Home warranty plans are occasionally referred to as appliance insurance, but this is a bit of a misnomer. A home warranty is not the same thing as a homeowner’s insurance policy, even if it operates on a similar principle.

A home warranty differs from homeowner’s insurance in the nature of its coverage. Homeowner’s insurance covers the structure of a home and personal property contained therein in the event of a fire, storm, burglary, or other unfortunate circumstance. An insurance policy will not cover the replacement of any home appliance or system that breaks down from years of general use. Without a warranty, that is the homeowner’s responsibility.

A home warranty will not pay out if personal property is destroyed or stolen—that’s what insurance is for. It will, however, cover the cost of repair or replacement if a refrigerator, heater, dishwasher, or other such appliance malfunctions.

What Does a Home Warranty Cover?

A home warranty can cover virtually anything in your home. Many warranty companies offer base plans that cover standard appliances and systems. The Liberty Home Guard Appliance Guard plan, for example, covers the following equipment:

• Clothes washers and dryers
• Refrigerators
• Built-in microwaves
• Dishwashers
• Garbage disposals
• Ranges, ovens, and cooktops
• Ceiling and exhaust fans
• Garage door openers

We provide a Systems Guard plan as well. This covers the following:

• Air conditioning
• Heating
• Ductwork
• Plumbing
• Electrical
• Water heaters

For homeowners interested in complete home coverage, we also offer a Total Home Guard plan, which encompasses all the above.

Homeowners can personalize their plans with additional items as necessary. Many customers opt to add coverage for water softeners, sprinkler systems, central vacuum systems, pools, generators, electronics, and more.

Finally, home warranties can also provide a variety of home maintenance services. Homeowners can amend a policy to include services such as pest control, gutter cleaning, carpet cleaning, rekeying, septic tank pumping, and window washing.

While the breadth of home warranty coverage is expansive, there are certain components and problems that a warranty is unlikely to cover. We’ll explain this further as we get into warranty contracts.

What Information Is in a Warranty Contract?

A warranty contract or user agreement is a thorough writeup of a homeowner’s obligations and benefits as a policy holder. Let’s break it down section by section.

• Terms & Definitions. Most contracts open with a section that defines key terms that appear in the contract. Precise definitions of even common words and terms are necessary to clarify meaning and avoid disputes between parties. A contract may specify, for example, what “normal wear and tear” means, or it may distinguish between the “purchase date” and “effective date” of the policy.
• Agreement Summary. One of the most substantial sections of a warranty contract is the summary of the policy. This provides general information about how the policy operates. The summary may stipulate the kind of appliance or system damage the policy will cover. It may identify when the policy is due to expire, and it may itemize the various home warranty prices. It will likely provide information on what to expect if a covered item cannot be repaired or replace, or if the cost of repair exceeds a coverage limit.
• Instructions for Use. Most warranty contracts will also provide clear instructions on how to exercise a home warranty policy. The contract will likely provide phone numbers or websites that homeowners can use to request service. It will explain how the company will select technicians and schedule service, and it will describe what is expected and not expected of the homeowner.
• Coverage Specifics. A good contract will be explicit about the items and circumstances the policy covers. It will list each appliance and system and describe the precise components that will be repaired or replaced in the event of a breakdown. For example, a standard policy with dishwasher coverage may cover all mechanical parts and components but not racks, baskets, gaskets, and soap dispensers.

This information is important. It’s not worth scheduling a service call for a broken component that the policy won’t cover.

• Limitations & Exclusions. Warranty contracts must specify any condition that would preclude coverage for repair. They also describe what the warranty provider is not responsible for. For example, warranty providers will not pay construction costs associated with removing or installing an appliance.

This section may also include language to protect the warranty provider from legal liability.

• Policy Changes. A warranty agreement will also provide information on how to make changes to a policy. This could include step-by-step instructions and expectations for policy renewals, transfers of ownership, and cancelations.

In short, a warranty contract is an invaluable document. It provides legal protection for both the homeowner and warranty provider, and it outlines every bit of information that is relevant to the policy.

If you’d like to review a sample contract, you can find one on the Liberty Home Guard website. When you’re ready to craft a plan to protect your home, call (866)-761-2351.