5 Tips to Understanding a Home Warranty

Updated June 1, 2016
Verify your home warranty company before signing a service contract. (Photo courtesy of Darien Wilson)

A home warranty is not like homeowners insurance.

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Don't be hoodwinked by a home warranty service contract. Homeowners sometimes make the mistake of thinking home warranties act like homeowners insurance — they don't.

Before you buy or renew a home warranty, consider the following tips:

1. Verify licensing of home warranty company

Check with your state's department of insurance to verify if the home warranty company you're considering is properly licensed to do business. If licensing isn't required in your state, review the company's status with Angi, as well as your local consumer protection agency.

What is a home warranty?

2. Review the fine print in the contract

Be sure to thoroughly read the fine print — the devil is in the details, and you want to make certain the proper items are covered by the warranty. Don't be afraid to speak up and ask the company any lingering questions before deciding if a home warranty service contract is right for you.

3. Communicate with your real estate agent

If you've received the home warranty when you bought a house, keep your real estate agent in the loop regarding any denied claims. He or she may have a relationship with the home warranty company and can make a call on your behalf.

4. Don't void your warranty by accident

A home warranty offers protection for a fixed period of time, but only if certain conditions are met. First, the system in question needs to fall under the policy umbrella. Be aware that any add-on work you do may void your warranty.

Next, any system covered needs to be maintained properly. This means, for example, that if you don't have your furnace cleaned every few years, your provider may deny you coverage in the event of a failure.

It's also important to understand that many home warranties don't cover major structural damage such as a crack in your basement wall or a leaky roof. If you're building a new home, however, often state law will require your builder to provide a warranty against major structural issues for a certain period of time.

5. Submit a review

Be sure to tell the home warranty company if their network contractor did a good job or not. Most home warranty companies keep a rating system on their contractors and disperse work accordingly. Also, submit a review with Angi, so other homeowners in your community can keeps tabs on who is performing well.

Editor's note: This is an updated version of a story originally published on May 4, 2011.

Have you ever had a home warranty? Tell us about your experience in the comments section below.

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