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Home Warranty Glossary

Like any other industry, the home warranty space has its own technical jargon that can make understanding your coverage benefits more challenging than it already is. Whether you’re a first-time policyholder or just need a refresher, we’ve created this A-Z home warranty glossary to help you navigate past any dense terminology.

A

Act of God — An unforeseen and unpreventable natural force or hazard beyond human control (i.e., tornadoes, hurricanes, lightning, etc.) which are not covered by home warranties.

Actual Cash Value (ACV) — The monetary value equivalent to the replacement cost of an appliance or system minus the year-over-year depreciation of the item at the time of its breakdown.

Additional Coverage — Extra coverage that can be added to a home warranty plan, typically on an à la carte basis, to protect household features not typically included in a standard policy.

Administrative Fee — A one-time fee typically charged when policyholders opt to cancel their service contract after the first 30 days of coverage.

Alternative Dwelling Unit (ADU) — A smaller, secondary dwelling within the same property grounds as the primary residence.

Annual Limit — The maximum amount per year that a home warranty will cover the cost to repair or replace an approved home appliance or system.

Appliance Insurance — Another term for home warranty coverage, specifically for appliances, which covers repair costs related to normal wear and tear over time.

B

Book Value — The fair market value of a covered appliance or system at the time of the service request.

Breach of Warranty — Any instances where a provider violates,  doesn’t follow through with, or otherwise misconstrues the representation of the service promised by your official contract.

C

Cash-in-Lieu — A home warranty company may offer to compensate covered damages to systems and appliances with cash rather than order a replacement of the affected item on your behalf. This most often applies in situations where total replacements are necessary, and a provider can’t find a comparable unit, therefore they leave the selection process up to the policyholder.

Claim — A means for policyholders to notify their service provider of an appliance or system issue to initiate the repair or replacement process.

Claim Denial — When a home warranty provider rejects your request for service, typically due to an item’s coverage ineligibility.

Class Action Waiver — A provision, often found toward the end of a home warranty service contract, that limits a policyholder’s right to file a class action lawsuit as a means of dispute resolution.

Code Violations — Improper installations of key functional features within a property that ultimately go against any building codes established and enforced by municipal and state laws.

Commercial-Grade — The quality of products designed to be used in commercial settings. Most home warranty contracts emphasize that commercial-grade appliances and systems aren’t eligible for coverage through a residential home protection plan.

Comprehensive Coverage — Refers to the maximum level of available coverage through any given provider’s home warranty plan options. Most will include dual coverage for appliances and systems with high annual coverage limits.

Consequential Loss —Secondary damage or loss due to a primary appliance or system failure. (i.e. wood rot in your cabinetry caused by a pipe leak under the kitchen sink)

Consumer Product Safety CommissionAn independent agency of the United States government dedicated to protecting “the public from unreasonable risks of serious injury or death from thousands of types of consumer products under its jurisdiction, including mechanical, fire, electrical, or chemical hazards.”

Contract Agreement — A legally binding manifestation between two parties — in this case, the homeowner and home warranty provider — concerning the transfer of service between the two and its agreed-upon terms and conditions.

Corrective Work — Maintenance or other repair work that a buyer may request to be done before purchasing or closing on a home.

Coverage Rider — See “Additional Coverage” or “Optional Coverage.” Another term for an add-on, a rider is an optional coverage item available for an extra fee.

Curable Defect — When a home for sale has an identifiable issue that can be corrected by either the seller or buyer based on the terms of the service agreement.

D

Deductible — Also known as a service call fee, this is an out-of-pocket payment due each time a policyholder requests a repair or replacement for a new issue. This payment goes toward covering labor costs and travel expenses for technicians.

Defective Manufacturing Process — An error in the initial design of a product, causing it to not work properly.

Diagnostic Appointment — The first appointment in the service request process. No repairs or replacements are made at this time, only an assessment of the issue, which will be given a price estimate by a technician to be reported back to the home warranty provider.

Dispute Remedy — The process of resolving an issue between a policyholder and their service provider, most frequently regarding claim denials.

Domestic-Grade —  The quality of a product used in at-home settings. Most home warranty contracts only cover domestic-grade appliances and systems.

E

Effective Date — The day on which a home warranty’s coverage officially begins, immediately following the instated waiting period.

Exclusions —  Any appliance, system, or other home feature explicitly not covered by the home warranty.

Extended Warranty — An additional service contract that typically prolongs the coverage or services offered by an original standard warranty, like a limited manufacturer’s warranty.

H

Home Insurance — A form of property insurance designed to protect homeowners against potential losses in the event of a natural disaster (hurricanes, wind, lightning, fire, etc.) or any other unforeseen accident affecting your home and the people in it (theft, vandalism, etc.)

Home Warranty — A form of home protection designed to help homeowners offset the cost of repairing major appliances and systems when they break down unexpectedly due to normal wear and tear over time.

I

Insufficient Maintenance – A common exclusion across home warranties, appliances, or systems that don’t receive routine tune-ups, regular cleaning, or are generally neglected won’t be eligible for coverage.

International Association of Certified Home Inspectors (InterNACHIⓇ) — The largest global organization of both residential and commercially-trained home inspectors. InterNACHI is a nonprofit membership trade association based in Boulder, CO, but operates in 65 countries.

Item Examples — The typical system and appliance inclusions within a standard home warranty contract, such as HVAC, plumbing, electrical, kitchen refrigerators, dishwashers, clothes washers, dryers, etc.

Item Lifetime — Refers to the predicted lifespan of a covered appliance or system.

L

Liability — A person or company’s binding legal responsibility for a specific scenario, commonly related to money owed.

Limitations — A limiting clause or restriction as it pertains to the core conditions of a contract or policy.

M

Manufacturer Warranty — Most appliances and systems come with an original limited warranty that protects the product against factory defects or specific failures within the first year of ownership.

Mechanical Failure — The sudden inoperability of an appliance or system due to loss of mechanical action.

Mismatched Systems — Instances in which two interrelated components, parts, or units are different in brand, size, quality, age, etc. Most home warranties won’t cover damage related to the incompatibility of built-in systems.

N

National Home Service Contract Association (NHSCA)A nationwide nonprofit trade organization that oversees the home service contract industry as a whole, regulating the licensure of all providers operating in the United States.

New Construction Consumer — A set demographic of prospective homebuyers more inclined to purchase new or custom home builds rather than buying a pre-owned property on the market.

O

Operating Condition — Every home warranty company requires all appliances and systems covered within a contract to be in fully functional order prior to the start date of coverage. This is primarily encapsulated by the general exclusion of pre-existing conditions industry-wide. Providers aren’t liable to help cover any breakdowns or malfunctions that predate the official coverage term.

Optional Coverage — See “Additional Coverage” or “Coverage Rider’.” Providers typically offer this in à la carte form, meaning customers can add features not typically included in standard home warranty coverage as they see fit. These optional coverage riders are priced separately from the monthly or annual premium.

P

Payout – The set amount a home warranty company will contribute, typically per year, toward a covered appliance or system failure. This is synonymous with annual coverage limits, which are used interchangeably throughout service contracts.

Pre-Existing Condition – Any issue with a covered item that predates a contract’s active coverage term. For example, if your built-in microwave were inoperable before signing up for your home warranty plan, it would be deemed a pre-existing condition and, therefore, won’t be eligible for coverage once enrolled.

Provision – A stipulation within a contract. A policy’s terms and conditions are a broad example of a legal provision.

R

Renewal Customer – A customer that has fulfilled at least one year of coverage through a home warranty provider and opts to repeat their coverage into the next consecutive year by renewing.

Required Upgrade – Old home systems or outdated installations that no longer meet current inspection standards will be deemed required upgrades. For example, older homes with their original interior electrical systems often require whole-house rewiring.

Routine Maintenance – Maintenance tasks done on a recurring basis in an effort to prevent future issues or spot potential problems early on.

S

Sample Contract – Most home warranty providers typically offer a publicly available boilerplate warranty online for prospective customers to refer to before even requesting a quote. Sample contracts are a great way to browse the specificities of any provider’s policy details prior to signing up.

Service Contract – The legal agreement portion of a home warranty policy, held between the homeowner and the service provider. This essentially outlines the terms of coverage and the agreed-upon period of time that the home protection services will remain in effect.

Service Contractor – The technician that will, in most cases, be dispatched to your home by your provider to diagnose and repair any issues eligible for coverage.

Service Fee – An out-of-pocket payment, much like an insurance deductible, due each time you make a new service request through your home warranty provider. Even if the issue at hand isn’t eligible for a covered repair or replacement, you’ll still be required to pay a service fee for the initial diagnosis. Most service fees range from $60-$125.

Service Records –Receipts, maintenance reports, or any other proof of previously scheduled servicing for the appliances and systems in your home. Your home warranty provider can request service records anytime during the claims process.

Simple Mechanical Test – A surface-level inspection of an appliance or system’s basic functionality. Standard mechanical testing generally involves turning an item on and off to ensure proper operation without abnormal sounds, smells, or poor responsivity.

Specific Plans – Some home warranty providers offer specialty plan options specifically tailored to buyers’ and sellers’ needs. These plan types are usually available through real estate agents who partner with a particular home warranty provider.

Stoppages – Anything physically obstructing a home’s interior plumbing system — sinks, bathtubs, toilets, showers, etc. — is considered a stoppage. Clearing of clogs is only eligible for coverage through an accessible cleanout 100 feet from an access point. Most home warranty companies won’t cover stoppages caused by tree root infiltration, collapses, or warping.

T

Trade Service Call Fee – See “Service Fee.” An out-of-pocket payment due by the policyholder each time they file a claim with their provider for a new issue in their home.

Transferrable –The ability to pass ownership of a policy between homeowners. In other words, if a policyholder opts to sell their home, they’ll be able to transfer their coverage to the buyer.

V

Visual Inspection – Assessing a home system or appliance for missing components or visible signs of damage like frayed wiring, scorching or burn marks, poor workmanship, etc.

W

Waiting Period – A set period of time between initial sign-up and when policyholders can file their first service request. Most providers instate a 30-day hold before the coverage period begins after enrollment to dissuade homeowners from filing claims for pre-existing conditions.

Warranty – A form of written guarantee that promises a conditional remedy, often financial, for a specified product or set of scenarios. Warranties generally serve as an added layer of insurance, attesting to the quality or longevity of an item or service.

Workmanship Guarantee – Provides extra coverage against secondary failures caused by poor workmanship or any installation errors.

Looking for more information on home warranty companies? Check out some of our other expert reviews to get all the details you need. Remember, each of these companies gives a free quote.

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