Is a Home Warranty Required in the United States?

In the 1970s, when the housing market was flourishing, and consumers were looking to safeguard their expensive home appliance purchases, home warranties were first made available to homeowners in the United States. Unfortunately, the regulation of home warranties is split between the federal and state governments, which means that the federal government usually sets the standard while the states decide how to implement it within their borders. Since there is no national standard for home warranty agreements, they differ significantly from state to state. 

Cost Of A Home Warranty In The United States

Cost is an important consideration when vetting a home warranty plan. The costs can include monthly or annual fees, service fees at the time of claim, and add-on coverage. Additionally, some plans require a one-time enrollment fee. Before purchasing a home warranty plan, consider how much it would cost to repair and replace typical household items. Many sellers will cover the cost of a one-year warranty, but the buyer is responsible for service fees or other costs associated with extending the coverage.

Home warranty coverage is paid for with service call fees and monthly premium payments. The premium will cover the cost of most repairs, and the warranty company will pay for the rest. The service fee varies depending on the plan, but a low deductible will make a home warranty less expensive. The service fee will be applied to a specific claim, such as a broken furnace or HVAC system. 

Coverage Provided By A Home Warranty Plan

A home warranty plan is designed to cover repairs to appliances and systems in the home. While many warranties cover pre-existing conditions, some conditions are excluded. For instance, if your refrigerator starts making strange noises, the warranty company will not cover it. However, if you recently had a home inspection, you can still get a warranty plan for that. Some home warranty plans will accept the report and cover repairs for pre-existing conditions.

Most home warranty plans have a deductible that the homeowner must pay. Typically, a deductible of $75 or $125 applies to appliance replacement. However, the coverage limits for home appliances vary, and homeowners who exceed this amount will have to pay the difference. Prices for home warranty plans differ depending on the provider, square footage, and the type of plan you choose. 

Requirements For Obtaining A Home Warranty In The United States

The requirements for obtaining a home warranty in the U.S. vary from state to state. While some national standards exist, each state has specific laws regarding service contracts like the home warranty company comparison for Michigan. According to Tim Meenan, the general counsel of the Service Contract Industry Council, over two-thirds of U.S. states have regulations in place to ensure companies are in business and have the resources to pay claims. State laws also require companies to provide clear and comprehensive disclosures.

It is necessary to have a home warranty in the first place to avoid fraud. Home warranties work like service contracts and can increase new product sales by bringing consumers peace of mind. Home warranties cover structural elements of a residential building and are, therefore, similar to service contracts and insurance policies. Although these programs have some differences, they have many similarities with traditional homeowner’s insurance. A home warranty is a contract between the homeowner and the service provider that covers certain repairs or replacements.

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