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If you've bought a house recently, the seller may have given you a home warranty to sweeten the deal. Or you may have bought a home warranty on your own, hoping to save yourself a big bill if, say, the dishwasher stops washing dishes.
A home warranty – or home service contract, as the industry prefers to call it – can save you the hassle of finding a qualified repairman as well as the budget-busting cost of some common home repairs. “We're providing a service for a homeowner on a budget,” says Art Chartrand, executive director of the National Home Service Contract Association. “We're not offering something for free, and we're not magicians, but we can send a prescreened contractor to your home to get you back up and running."
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Still, home warranties are not insurance, which protects you against damage from certain perils, such as fire and theft. Instead, they are service contracts, which means they cover only what's in the contract. Anything else is up to you. The first rule of any contract: Read it carefully before you sign it.
Generally speaking, a home warranty contract will cover most appliances that fail because of normal wear and tear. Typically, these will include kitchen appliances, water heaters, washers and dryers. If you own a home with older appliances, a home warranty can save you money in costly repairs. But there are a lot of things that a home warranty often won't cover. Among those:
1. Anything that fails within the first 30 days after signing.
Although a home warranty isn't insurance, it does borrow a few things from the insurance industry, and one of them is the homeowner's version of a preexisting condition. If your furnace wasn't working when you signed the contract – or dies soon after – the home warranty often won't cover fixing it.
2. Anything that fails due to something aside from normal wear and tear.
If your faucet stops working because a washer wears out, your home warranty should cover the repair. If your faucet fails because your child filled it with putty, your warranty probably won't.
Similarly, most contracts won't cover damage caused if your washer spews water onto the floor and into the basement. You'd have to see if your homeowners’ insurance covers that (which it probably would).