Association Issues Checklist of What Typical Home Warranties Cover, Don't Cover.

Business Editors

DUBLIN, Calif.--(BUSINESS WIRE)--Dec. 4, 2002

What does a home warranty cover and what doesn't it cover?

It's a question gaining increased interest as nearly nine out of every 10 existing home sales in California include a home warranty.

In an effort to assist consumers, the Home Warranty Association of California (HWAC) has provided an outline of home warranty coverage terms and conditions.

Typically, a home warranty covers a home's major operating systems from breakdowns due to wear and tear for one year after the close of escrow. Items covered include plumbing, heating and electrical systems, most built-in appliances, and water heaters. In recent years, most HWAC member companies have provided additional coverage for homeowners for such items as air conditioners, washer/dryers and refrigerators. Accordingly, coverage parameters include:

-- A "covered" system or appliance must be listed as a covered item in the contract; it must be located within the confines of the main foundation of the home or garage (with the exception of exterior well pump, air conditioner, and pool equipment). Items must also be in good working order at the start of coverage, and must be properly installed.

An example of an item not covered under the contract includes a pipe or plumbing line that is broken or leaking outside the home's main foundation.

-- Home warranties do not cover consequential or secondary damages. Take a leaking water heater, for example. The warranty company will repair the leaking water heater up to and including the replacement of the unit if necessary. But the warranty does not cover water damage that may have been caused by the leak. Typically this kind of damage would be covered by the homeowners insurance policy.

-- Home warranties cover residential property. They do not cover residences utilized for commercial use such as day care centers, or non single-family homes like fraternity houses, or nursing homes.

-- A home warranty does not require a home inspection or other inspection prior to coverage. However, if a defect is obvious or known prior to the home warranty becoming effective, it is not covered.

-- A home warranty covers virtually any age, make or model of covered systems and appliances designed by the original manufacturer for residential use. It does not, however, cover equipment categorized by the manufacturer as commercial equipment.

-- When a contractor is required to repair a leak in a wall or floor, the home warranty company will generally provide access and return the opening to a rough finish condition. The home warranty company is not responsible for restoration of any wall coverings, floor coverings, cabinets, countertops, tiling, paint, or the like.

-- A home warranty company is not responsible for repairs arising from a manufacturer's recall of covered items, or any items while still under an existing manufacturer's, distributor's or in-home warranty.

-- A home warranty company is not responsible for costs required to correct code violations, or in some contracts, costs related to permits. A home warranty company will not perform service or pay costs involving hazardous or toxic materials, mold, or asbestos, nor will it pay for disposal of refrigerants, freon or contaminants.

It is important to read your home warranty contract carefully, particularly the "covered" and "not covered" sections, HWAC officials said.

HWAC is a statewide organization of home warranty companies representing approximately 95 percent of warranty contracts sold in California.

Member firms include American Home Shield, AON Home Warranty, Buyers Home Warranty Company, Fidelity Chicago National Home Warranty Company, First American Home Buyers Protection, HISCO Home Warranty Company, and Old Republic Home Protection Company, Inc.