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understanding home warranties

K APLAN R E A L

E S T A T E

E X P E R T

A Consumer Guide and Educational Resource for Arizona Home Buyers. Questions to Ask, Features to Compare, and Information to Help You Make an Informed Decision.

WHY I CREATED

This Guide

Purchasing a home is one of the largest financial investments most people will make. While buyers often spend considerable time evaluating the home itself, many give little thought to a home warranty until they are asked whether they would like one. Home warranties can provide valuable protection for some homeowners, but plans, coverage, exclusions, service fees, and optional upgrades vary considerably from one company to another. Rather than recommending one company over another, I created this guide to help you become a more informed consumer by highlighting important questions to ask, common terms to understand, and factors to consider when evaluating whether a home warranty is right for your particular situation. My hope is that this guide helps you feel more confident in making a decision that best fits your home, your budget, and your personal preferences.

PURPOSE OF THIS GUIDE This guide is intended to help you become a more informed consumer by highlighting some of the questions to ask and features to compare when evaluating home warranty companies and plans.

What is a

HOME WARRANTY?

A home warranty is a service contract that may help pay for the repair or replacement of certain covered home systems and appliances that fail due to normal wear and tear.

EX AMPLES OF ITEMS COMMONLY COVERED MAY INCLUDE: • Air conditioning and heating systems • Water heaters • Plumbing systems • Electrical systems • Kitchen appliances • Garage door openers • Ceiling fans • Built-in microwaves • Dishwashers • Garbage disposals

WHAT A HOME WARRANT Y IS NOT A home warranty is not homeowners insurance. Homeowners insurance generally protects against sudden events such as fire, wind, hail, theft, and certain types of water damage. A home warranty generally addresses the repair or replacement of covered mechanical systems and appliances that fail during the policy period due to normal wear and tear. Because every company and every plan is different, it is important to carefully review the details of any policy you are considering.

Is a Home Warranty RIGHT FOR YOU?

A HOME WARRANT Y MAY BE A GOOD FIT IF: • You are purchasing an older home. • Major systems or appliances are nearing the end of their expected life. • You would appreciate some budget protection during your first year of ownership. • You prefer having one company coordinate covered repairs. • The seller is providing a home warranty as part of your transaction.

A HOME WARRANT Y MAY BE LESS IMPORTANT IF: • The home is newly constructed and covered by builder warranties. • Major systems and appliances have recently been replaced and remain under manufacturer’s warranties. • You have established a repair reserve fund and prefer to self-insure. • You are comfortable coordinating repairs and paying for them as they arise.

There is no right or wrong answer. Some homeowners purchase a home warranty every year. Others only purchase one during their first year of ownership, while some decide not to purchase one at all. The decision ultimately depends upon your comfort level with unexpected repair expenses, the age and condition of the home, and your personal financial preferences.

Understanding

COMMON HOME WARRANTY TERMS

Service Call Fee The fee you pay each time a service technician is dispatched to diagnose a covered problem, regardless of whether the repair is approved. Aggregate Coverage Limit The maximum amount a warranty company will pay for all covered claims during the policy term. Coverage Limit The maximum amount a warranty company will pay for the repair or replacement of a specific system, appliance, or claim. Mechanical Failure The inability of a covered system or appliance to perform its intended function due to normal wear and tear. Code Upgrade Additional work, materials, or modifications required to bring a repair or replacement into compliance with current building codes. Compatibility Upgrade Additional parts or modifications needed to allow a new component or system to properly work with existing equipment. Pre-Existing Condition A problem or defect that existed before the home warranty coverage became effective. Builder Grade Replacement A replacement item that performs a similar function but may not match the original brand, model, features, color, or finish. Cash in Lieu A payment offered by the warranty company instead of repairing or replacing a covered item, in accordance with the terms of the contract. Optional Coverage Additional protection that may be purchased for certain systems, appliances, or specialty equipment that are not included in the standard plan. Exclusions Items, conditions, or circumstances specifically identified in the contract as not being covered. Waiting Period The amount of time that may pass before certain coverage under the policy becomes effective. Renewal The option to continue home warranty coverage by purchasing another policy term at the end of the current contract period.

HELPFUL REMINDER :

A few minutes spent understanding these terms can make a home warranty contract much easier to read and understand.

Questions

TO ASK DURING YOUR HOME INSPECTION Your home inspector can often provide valuable information regarding the age and condition of many of the home’s systems and appliances. While inspectors generally do not predict future failures, the information they provide may help you determine whether a home warranty would be beneficial and what optional coverage you may wish to consider.

QUESTIONS TO ASK: • How old is the HVAC system? • How old is the water heater? • Have any appliances been replaced recently? • Are any systems still under manufacturer’s warranty? • Are service records available? • Does the home have a pool or spa? • Does the home have a water softener, well, septic system, or other specialty equipment? • Are there smart home devices that may not be covered under a standard home warranty plan?

THINGS TO CONSIDER: An older air conditioning system does not mean that it will fail. Likewise, a newer system does not guarantee that it will not. Understanding the age, maintenance history, and condition of major systems can help you determine: • Whether a home warranty may be beneficial. • Whether optional coverage should be considered. • The amount of emergency repair funds you may wish to reserve after purchasing your home.

FEATURED HOME WARRANTY PROVIDERS

The following companies are among several well-known home warranty providers serving Arizona homeowners. They have been included to illustrate the types of coverage, options, and features buyers may wish to compare when evaluating a home warranty plan. This is not intended to be an exhaustive list, and other reputable companies may also offer plans that meet a buyer’s needs. Because home warranty companies periodically revise their coverage, exclusions, pricing, optional protection, service fees, and claim procedures, buyers are encouraged to review the current sample contract and speak directly with a company representative before purchasing any plan.

AS YOU REVIEW THE INFORMATION ON THE FOLLOWING PAGES, CONSIDER: • What systems and appliances are most important to you? • How old are the home’s major systems? • Do you prefer broad coverage or lower cost? • Would you prefer to use your own contractor if a repair is needed? • Are there specialty systems requiring optional coverage? There is no one “best” home warranty company for every homeowner. The right choice, if any, often depends upon the age and condition of the home, the systems being covered, and your own preferences regarding risk and budget.

HELPFUL REMINDER:

Request a sample contract from each company you are considering. A brochure or summary page may not include all limitations, exclusions, or coverage caps.

OLD REPUBLIC HOME PROTECTION COMPANY OVERVIEW Old Republic Home Protection has been providing home warranty coverage for homeowners and real estate transactions for many years and has built a strong reputation within the real estate industry. The company offers several plan options along with optional coverage for specialty items and systems.

NOTABLE STRENGTHS • Long operating history and established reputation. • Strong presence in Arizona and many other states. • Large contractor network. • Good selection of optional coverage. • Generally regarded for responsive customer service. • Broad appeal for both buyers and sellers.

THINGS TO CONSIDER • Coverage limits and optional upgrades vary by plan. • Certain items may have specific limitations or exclusions. • Optional coverage may be necessary for pools, spas, well equipment, or other specialty systems. • As with all home warranties, understanding the actual contract language is important.

MAY BE A GOOD FIT FOR… • Buyers seeking an established company with a long operating history. • Buyers purchasing older homes. • Buyers purchasing older homes. • Homeowners who value a broad service network. • Buyers seeking a balance of coverage and stability.

THINGS TO ASK • What optional coverage is available? • Are code upgrades covered? • What are the coverage limits for HVAC systems? • What service call fees apply?

GUARD HOME WARRANTY COMPANY OVERVIEW Guard Home Warranty offers a variety of home warranty plans and has developed a reputation for providing broader coverage options and increased flexibility in certain areas, including contractor selection and enhanced protection for major systems.

NOTABLE STRENGTHS • Higher aggregate coverage limits on certain plans. • Strong protection options for HVAC systems. • Coverage for certain code upgrades and modifications on some plans. • Ability to use your own contractor under certain circumstances. • Broad optional coverage offerings.

THINGS TO CONSIDER • Contractor networks may vary by area. • Certain benefits are available only under upgraded plans. • Coverage limits and reimbursement provisions should be reviewed carefully. • As with all warranty companies, exclusions and limitations apply.

MAY BE A GOOD FIT FOR… • Buyers wanting broader protection options. • Homes with older mechanical systems. • Buyers who prefer additional flexibility regarding contractors. • Homeowners seeking higher levels of protection for major systems.

THINGS TO ASK • What are the HVAC coverage limits? • Under what circumstances may I choose my own contractor? • Are permits and code upgrades covered? • What are the reimbursement procedures?

FIRST AMERICAN HOME WARRANTY COMPANY OVERVIEW First American Home Warranty has been serving homeowners and the real estate industry for many years and offers a variety of plan options with optional coverage available for additional systems and equipment.

NOTABLE STRENGTHS • Long-established company. • Strong Arizona market presence. • Good appliance coverage. • Variety of plan options. • Well-known within the real estate industry.

THINGS TO CONSIDER • Long-established company. • Strong Arizona market presence. • Good appliance coverage. • Variety of plan options. • Well-known within the real estate industry.

MAY BE A GOOD FIT FOR… • Long-established company. • Strong Arizona market presence. • Good appliance coverage. • Variety of plan options. • Well-known within the real estate industry.

THINGS TO ASK • Long-established company. • Strong Arizona market presence. • Good appliance coverage. • Variety of plan options. • Well-known within the real estate industry.

FIDELITY NATIONAL HOME WARRANTY COMPANY OVERVIEW Fidelity National Home Warranty has been serving homeowners and real estate professionals for decades and maintains a strong presence in Arizona and throughout many western states. The company offers several plan options and optional coverage for additional systems and appliances.

NOTABLE STRENGTHS • Long operating history. • Strong contractor network. • Widely recognized in the real estate industry. • Good plumbing coverage options. • Strong relationships within the title and real estate communities.

THINGS TO CONSIDER • Long operating history. • Strong contractor network. • Widely recognized in the real estate industry. • Good plumbing coverage options. • Strong relationships within the title and real estate communities.

MAY BE A GOOD FIT FOR… • Long operating history. • Strong contractor network. • Widely recognized in the real estate industry. • Good plumbing coverage options. • Strong relationships within the title and real estate communities.

THINGS TO ASK • What are the coverage limits for HVAC systems? • What optional upgrades are available? • Are code upgrades covered? • What are the limitations on specialty systems and equipment?

HELPFUL REMINDER:

Every home and every buyer is different. A company that may be a good fit for one homeowner may not necessarily be the best fit for another. Taking the time to compare plans and ask questions can help you make a more informed decision. 11

HOME WARRANTY COMPARISON WORKSHEET Every home and every buyer has different priorities. Home warranty companies periodically update their plans, pricing, optional coverage, exclusions, and service fees. The worksheet below is designed to help you compare the current information provided directly by each company so you can make an informed decision based upon your individual needs.

QUESTIONS TO ASK:

COMPANY A

COMPANY B

COMPANY C

COMPANY D

Annual Premium Service Call Fee Coverage Begins HVAC Coverage Limit Appliance Coverage Limit Aggregate Coverage Limit Code Upgrades Covered? Permits Covered? Modifications Covered? Refrigerant Costs Covered? Code Upgrades Covered? Permits Covered? Modifications Covered? Refrigerant Costs Covered? May I Choose My Own Contractor? Pool/Spa Coverage Available? Roof Leak Coverage Available? Pre-Existing Conditions Covered? Waiting Period? Renewal Options?

Additional Notes:

HELPFUL REMINDER:

Ask each company for a sample contract and review it before making your final decision. 12

5 QUESTIONS EVERY BUYER SHOULD ASK BEFORE PURCHASING A HOME WARRANTY 1. DOES THE POLICY PROVIDE REALISTIC COVERAGE FOR REPLACING AN AIR CONDITIONING SYSTEM? In Arizona, the air conditioning system is often the most expensive component in a home. Ask about coverage limits, replacement provisions, code upgrades, and other costs that may apply.

2 . DOES THE POLICY COVER CODE UPGRADES, PERMITS, AND REQUIRED MODIFICATIONS? Replacing certain systems may require permits, electrical upgrades, refrigerant changes, or additional modifications that can significantly increase the cost of a repair or replacement.

3. WHO CHOOSES THE CONTRACTOR? Some companies assign their own service providers while others may allow homeowners to use their own licensed contractor under certain circumstances.

4. WHAT ARE THE ACTUAL DOLLAR LIMITS? A system may be considered “covered” but still be subject to specific dollar limitations. Understanding these limits can help avoid surprises later.

5. HOW EASY IS IT TO FILE A CLAIM? Ask about service call fees, response times, how claims are handled, and whether service is available online or by telephone.

HELPFUL REMINDER:

The lowest premium does not always provide the best value. Take time to compare the details of each plan, not just the price.

TIPS FOR GETTING THE MOST VALUE FROM YOUR HOME WARRANTY Read Your Policy Before You Need It Understanding what is covered—and what is not—can help avoid misunderstandings later. Understand the Service Call Fee Most plans require a service fee each time a technician is dispatched. Keep Maintenance Records Some companies may ask for maintenance documentation on certain systems. Replace HVAC Filters Regularly Routine maintenance can help extend the life of your equipment and may prevent avoidable problems. Report Problems Promptly Addressing issues early may help prevent additional damage.

HELPFUL REMINDER: A home warranty can provide valuable peace of mind, but it should not be viewed as a substitute for proper home maintenance or maintaining an emergency repair reserve. Ask Questions Before Authorizing Repairs If you are uncertain whether something is covered, contact the warranty company before proceeding with repairs. Keep Important Information Together Maintain copies of: • Your warranty contract • Service records • Receipts • Claim information • Renewal notices 14

FINAL THOUGHTS A home warranty can provide valuable peace of mind, particularly during the first year of homeownership. Because coverage, exclusions, claim procedures, pricing, and optional upgrades vary among companies—and can change over time—it is important to carefully review the current policy information before making a decision. The purpose of this guide is to help you understand some of the features and questions that may be important when comparing home warranty plans. After reviewing your options, I encourage you to contact the home warranty companies you are considering and speak directly with one of their representatives. They can explain the details of their current coverage, answer questions about specific systems or appliances in your home, and help you determine which plan may best meet your individual needs. If you decide that a home warranty is right for you, I would be happy to assist with coordinating the purchase through the company you select as part of your real estate transaction.

IMPORTANT DISCLAIMER THIS GUIDE HAS BEEN PREPARED AS AN EDUCATIONAL RESOURCE TO ASSIST HOME BUYERS IN COMPARING HOME WARRANTY COMPANIES AND UNDERSTANDING GENERAL COVERAGE FEATURES COMMONLY OFFERED IN THE MARKETPLACE. THE INFORMATION PRESENTED IS BASED ON SAMPLE CONTRACTS, PUBLICLY AVAILABLE INFORMATION, AND GENERAL INDUSTRY RESEARCH AVAILABLE AT THE TIME THIS GUIDE WAS PREPARED. HOME WARRANTY COMPANIES PERIODICALLY REVISE THEIR COVERAGE, EXCLUSIONS, PRICING, CLAIM PROCEDURES, SERVICE FEES, AND OPTIONAL UPGRADES WITHOUT NOTICE. THIS GUIDE IS NOT INTENDED TO RECOMMEND OR ENDORSE ANY PARTICULAR HOME WARRANTY COMPANY OR POLICY, NOR SHOULD IT BE CONSIDERED LEGAL, INSURANCE, OR FINANCIAL ADVICE. BUYERS ARE ENCOURAGED TO CAREFULLY REVIEW THE CURRENT SAMPLE CONTRACT AND COVERAGE INFORMATION FOR ANY COMPANY UNDER CONSIDERATION AND TO SPEAK DIRECTLY WITH A COMPANY REPRESENTATIVE REGARDING SPECIFIC QUESTIONS BEFORE PURCHASING A HOME WARRANTY PLAN.

RESULTS DRIVEN. CLIENT FOCUSED. GLOBAL EXPOSURE.

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E S T A T E

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