How Does Home Repair Insurance Work and Is It Necessary?

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While homeowners insurance covers major perils, like fire and hail, it excludes coverage for specific items if damage stems from everyday use. Home repair insurance serves as a stand-alone policy that can bridge some of the gaps in coverage with a standard homeowners insurance policy. However, not every homeowner would benefit from home repair insurance, and some may already have coverage without realizing it.

What Is Home Repair Insurance?

Home repair insurance, commonly referred to as a home warranty or home maintenance insurance, is an optional policy that protects homeowners against wear and tear to major home systems and appliances. Generally, the coverage included in home maintenance insurance is excluded in a standard homeowners insurance policy. For instance, if your air conditioning unit stops functioning due to a mechanical failure, your home maintenance insurance would cover the cost, whereas your homeowners insurance wouldn't.

The companies that offer home warranties are often small in size, not well-known national companies like State Farm or Farmers. The coverage you receive from your home repair insurance varies widely depending on the insurer. Below are some of the most commonly covered items.

  • Mechanical items in your home, like ceiling fans
  • Indoor plumbing, including drains, sinks, faucets and pipes
  • Most appliances, including washing machines, refrigerators, washers, dryers, dishwashers and microwaves
  • Wiring systems, including electrical and cable lines
  • Heating and cooling units, like air-conditioning units and furnaces

Home repair insurance policies have limits for certain items that are set at a specific dollar amount. For instance, a company may place a $1,500 limit on washing machines. As a result, your coverage for washing machine repairs or a replacement will not exceed $1,500, even if your machine is worth more. This means that if you have low limits, you'd have to pay for the difference between what is covered by your policy and the cost of the repairs or replacement. Most companies have different policy limits for different items, so it's best to read the fine print before purchasing a policy.

How to File a Claim

If something that is covered under your home repair insurance policy breaks, first call the company that issued the policy. Most companies will connect you with a prescreened contractor in your area. The contractor will then come to your home and assess the damage. If the item qualifies for coverage, you can expect it to be repaired or replaced as long as it is within the limits of your policy.

Do I Need Home Repair Insurance?

To evaluate whether you need home maintenance insurance, take an inventory of all your major appliances and systems and their ages. You can then compare the ages of the most costly items and systems in your home to their average life expectancies according to the International Association of Certified Home Inspectors. If a large portion of your most expensive appliances and home's systems are approaching the end of their life expectancy, you'll want to sign up for home repair insurance. That is, assuming you have well-kept records of your home's systems and appliances.

We list some of the most common appliances and systems below, along with their life expectancies.

Appliance or UnitLife Expectancy
Air Conditioner (central)Seven to 15 years
Ceiling FanFive to 10 years
Furnace15 to 25 years
DishwasherNine years
Gas Oven10 to 18 years
Electric Range13 to 15 years
RefrigeratorNine to 13 years
Washing MachineFive to 15 years
Dryer13 years
Microwave OvenNine years

If your home's appliances and systems are on the newer end, you're probably better off not purchasing coverage. In fact, it's common for new homes to come equipped with a one-year warranty. However, these warranties typically exclude coverage for household appliances. So, the warranty for a new home would cover systems like heating, air conditioning and electrical, but not appliances like a dryer, microwave or an oven. Therefore, new homeowners should evaluate whether the repair or replacement of appliances alone justifies the cost of home repair insurance.

How Much Does Home Repair Insurance Cost?

Much like homeowners insurance, the cost of home repair insurance varies widely depending on the level of coverage. You can expect to pay around $300 per year for the most basic coverage, which typically only provides repairs and replacement for appliances. The higher priced policies can cost as much as $600 per year, but they provide coverage for more items such as swimming pools and hot tubs. Keep in mind that many companies also allow you to build a custom policy, which means you can select which items you want covered and exclude items to save money as you see fit.

Most home repair insurance policies last for 12 months and can be renewed. Companies typically allow you to pay for coverage all at once or in monthly installments. In addition to the annual cost, homeowners will have to pay a service fee when they request a repair or replacement. The per-use fees can range from $50 to $125. Agreeing to a higher per-use fee will result in a lower annual cost and vice versa, similar to the relationship between deductibles and premiums on homeowners insurance policies.

Home Repair Insurance for an Old Home

The main drawback to home repair insurance is that most companies have stipulations that require customers to perform routine maintenance to keep units eligible for repairs and replacement. For instance, if your washing machine manufacturer recommends replacing water hoses every six months, your coverage would be void if you failed to do so. This might not be a problem for new homeowners, but it may cause problems for those purchasing an older home. Most homeowners won't be able to provide records or proof that routine maintenance was carried out on the home's appliances or systems by the previous homeowners.

New homebuyers should ask the previous homeowners to provide a record of maintenance, home improvements and manuals for major appliances in the home. If the previous homeowners can't provide records for a home's systems and major appliances, then avoid purchasing home repair insurance, as you could end up paying for coverage but not qualifying for repairs or replacements. If the previous homeowners can provide detailed records, ensure there was routine maintenance performed on the home's most expensive appliances and systems.

Regardless, moving forward, you should keep a home maintenance log with all the aforementioned records. This will help you get home repair insurance in the future and ensure you can use it. As a side benefit, keeping a detailed inventory of your home's contents could prove useful if you ever need to file a homeowners insurance claim.

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