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A Home Warranty is basically an insurance policy. It insures the mechanical, electrical and plumbing parts and systems of a house. A Home Warranty provides the same comfort as any insurance against unforeseeable events. Many homeowners claim that their warranties have more than paid for themselves.

How Does it Work?

While each Home Warranty company operates a little differently, there are some basics that apply. Each has a “basic plan that covers routine heating, plumbing and electrical systems. In addition, they offer optimal coverage for air conditioning, pools and spas, appliances, etc. charged on a per item basis. Some companies offer more comprehensive “basic” plans that others, including such features as irrigation systems and garage door openers.

A Home Warranty plan can be ordered at the time of listing to protect the seller during the listing period, usually not exceeding six (6) months, then assumed by the buyer at the time of the sale.  A Warranty may be purchased during the escrow process, and some Home Warranty companies allow the buyer to make the decision to have a plan after purchasing the home.

The Process, Step-by-Step

First the application is completed and submitted to the Home Warranty Company, either by phone or by fax. The application should delineate which plan and options are being ordered, and include the agent’s and the property’s information. Some companies offer different plans depending on whether it is for a sale. For example, some companies allow more options to the buyer at the time of the sale then to the seller at the time of the listing. There are companies that require a mechanical inspection prior to approval of the application. It is considered an advantage during your “walk through” to check for any “red flags.”  In this case, a report of the inspection is faxed to the ordering agent with the results. Upon approval, the policy is in effect.

Depending on the company, when service is needed, the policy holder may either call the warranty company and provide their policy number and state the problems, then wait for a call from an outside service company to arrange for service. Or call their in-house service department directly to arrange service.

At the Close of Escrow

Most Home Warranty plan payments are not due until the close of escrow.  At the time, a copy of the invoice, listing the coverage ordered, is sent to the escrow company for payment, along with an inspection report, if requested.  A copy of the policy is mailed to the new policy holder.  During the transition period, the policy is in effect.


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