What Is A Residential Service Contract and What Does It Cover?
While it’s sometimes referred to as a home warranty, a residential services contract is a separate thing entirely. A home warranty is offered by the company responsible for building the home and offers coverages for such things as building materials and defects caused by poor workmanship. A residential services contract covers household systems and certain appliances and is obtained through a third-party provider.
Read on to learn more about residential services contracts, what they cover, and how you can benefit from having one.
What is a residential service contract?
A residential services contract is a legally binding contract between the homeowner and a third-party provider, outlining the terms and conditions for repairing pre-determined household systems and appliances. While home warranties are automatically provided by the builder of the home, a residential services contract is something that the homeowner signs up for in the same way they might sign up for insurance.
There are several other ways a residential services contract differs from a home warranty.
Cost
Residential services contracts have two separate costs: the monthly premiums and the service call fee. The amount of the monthly premiums may vary depending on where you live, which provider you choose, and your chosen level of coverage. Monthly premiums can range from $25 to $60 a month or $300 to $600 a year. The average service call fee ranges between $75 and $125. While the monthly premium is a revolving fee that is determined by the type of coverage you opt for, the service call fee is only required when service is needed.
Service calls
If a household system or appliance that’s covered under the terms of the contract requires repair, the homeowner can contact their service provider. From there, the provider contacts a local technician, who may arrange a time to visit and diagnose the problem. This is when you’ll need to pay the service call fee. If the problem is determined to be covered by the contract, your provider typically sends the technician back to do the repairs.
Lodging a claim
Your contract should outline the process by which a claim can be lodged. Providers often have portals or links on their websites to allow you to begin the claim process online.
Exclusions
Along with the household systems and appliances that are covered, a residential service contract also details items that are not covered. For example, outdoor appliances and systems, as well as appliances with pre-existing conditions, are not likely to be covered.
Transferability
Some residential service contracts can be transferred to the next homeowner if the covered property is sold during the term of the contract. However, these contracts are often non-transferable.
Coverage periods
Usually, standard residential service contracts provide coverage for a period of one year, with the option to re-sign when that year is up. That said, some providers offer multi-year contracts that you can obtain for an affordable monthly premium. Coverage usually begins once a full month has elapsed after the signing. During this 30-day span, you’ll typically need to pay out of pocket for necessary repairs.
Purchase points
Most providers are happy to allow you to purchase a residential service contract at any point in your home ownership. If you happen to be in the process of selling your home, signing up for a transferable contract – assuming you haven’t already got one – acts as an extra incentive for potential buyers.
Coverages of a residential service contract
Items covered under a residential service contract typically fall under one of three categories: appliances, systems, or add-ons. Here’s a quick breakdown of the coverages in a typical residential service contract, as well as what isn’t covered:
Covered appliances
Refrigerator
Garbage disposal
Washing machine
Ceiling fan
Clothes dryer
Oven
Built-in microwave
Stove/range
Cooktop
Dishwasher
Central vacuum
Water heater
Covered systems
HVAC
Electrical
Ductwork
Plumbing
Water heaters
Common add-ons
Window washing
Power washing
Stand-alone freezer
Extra refrigerator
Carpet cleaner
Lighting fixtures
Pool/spa equipment
Water softener
Roof
Electronic equipment
Septic system
Water filter
Well pump
Gutter cleaning
Sump pump
Guest house systems and appliances
Swamp cooler
Sprinkler system (sometimes)
Professional appliances
Pest control
Generator
Rekeying
Security system
What’s not covered
Garage doors and door tracks
Windows
Walls
Doors
Sprinkler systems
Decorative fountains
Window air conditioning units
When signing up for a residential service contract, it’s important to make note of the type of damage that may prevent a system or appliance from getting covered.
This includes:
Failure related to poor maintenance
Abuse or accidents
Improper installation/modification
Known and unknown pre-existing conditions
In these cases, you may be responsible for hiring and paying for a service contractor.
Benefits of a residential service contract
While it may seem like a residential service contract is just an added expense with its monthly premiums and additional service call fees, the benefits of having one in place are too substantial to ignore.
Here are several ways you could benefit from getting a residential service contract:
Offers peace of mind – Knowing that your most important systems and appliances are in good hands when they break down can take a lot of potential stress off your shoulders. Rather than spending time hiring an outside technician to diagnose and repair the problem, all you have to do is start a claim. Your provider manages the rest.
Safeguards against unexpected costs – Unexpected repairs can get expensive, but having a residential service contract in place helps make those expenses far more manageable.
Boosts home value – A residential service contract could boost the selling value of your home because it’s often seen as an added benefit for potential buyers.
Provides reliable repairs – A residential service contract provider has access to a network of experienced technicians, ensuring your systems and appliances are well looked after.
Lowers maintenance costs – Rather than having to shell out large sums of money to repair or maintain your household systems and appliances, you’ll typically only be liable for the monthly premiums and the service call fees.
Makes getting repairs simpler – The process of getting your appliances and systems repaired is usually outlined in the terms and conditions of the contract, so there’s less guesswork involved.
How to choose a residential service contract
Taking the time to choose your coverages is important, but so is researching your potential provider to ensure that you’re getting a contract that fits your needs and budget.
When looking for a good provider, consider doing the following due diligence:
Gather quotes from a number of providers
Compare premiums, service call fees, and coverages between shortlisted companies
Check the coverage caps for high-end appliances, if needed
Ask providers questions about their coverages, claims process, and customer service protocol
Look for red flags
Here are some of the red flags you should watch out for when researching providers:
High number of negative customer reviews
Inability to meet state regulations or obtain relevant licensing
Poor ratings with the Better Business Bureau, as well as sites like TrustPilot
Lack of experience
High-pressure sales strategy
Requesting personal information for quotes
Short work guarantees
Really low or higher-than-average prices (without value-adding features to support the high price)
Poor coverage caps
Vague contract language
Poor response time
Difficult claims/cancellation processes
After you’ve found a suitable provider, here are the four main things you need to consider when choosing your coverage:
What is covered under each category?
Do you need appliance, household system, or combo coverage?
How much do the add-ons cost?
Will your coverage support repairs, maintenance, or both?
These are trying times, and having appliances and household systems in need of repair only adds to the stress. Signing up for a residential service contract can take a load off your shoulders by providing the peace of mind of knowing your home is well cared for. Contact providers play a big part in keeping your home running by simplifying the claims process, offering a comprehensive list of covered items, and engaging experienced technicians.
Even if you live in an older home or have appliances with known pre-existing conditions, a residential service contract is still worth considering since these typically aren’t factors that prevent you from getting coverage. A residential service contract may be well worth the (small) expense to give you peace of mind among the stresses of everyday life.
If you are a homeowner or are planning to buy a home, consider adding a home warranty to your to-do list. It’s a financial safety net that can shield you from unforeseen expenses related to your home’s systems and other components.
