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What are Home Service Contracts?

Article Details
  • Written By: D. Nelson
  • Edited By: M. C. Hughes
  • Last Modified Date: 06 December 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Home service contracts are warranties offered by certain providers that offer payment for costs related to the repair and sometimes replacement of homeowners' major appliances. While this kind of contract may resemble insurance, it is quite a bit different. To begin with, deductibles and other payments associated with insurance are not used in home service contracts. Likewise, insurance pays for damages to appliances and other household items caused by misuse, vandalism, and preexisting problems, while contracts normally pay for repair or replacement that is the result of normal use.

Most home service contracts cover all of the major appliances that are likely to be found in many typical homes. Appliances covered by these contracts may include dishwashers, plumbing systems, ovens, garbage disposals, and garage door openers. Appliances such as home spas and swimming pools are sometimes included in a contract, though these are not as common. While there are a list of appliances that are common in most contracts, coverage does different from provider to provider. An individual considering purchasing a contract should make sure that he or she understands the terms and limitations.

The length for which the contract is good also differs among providers. One year is a common term for most home service contracts. In many cases, consumers may purchase another contract after the prior contract has expired.

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Costs of contracts also differ among providers. Many individuals find that home service contracts may range in cost from 300 US Dollars to 500 US Dollars. Some contracts do require that a homeowner pays for house calls from repair people while other contracts may even pay for the price of the visit. Factors such as the amount of appliances covered and the limitations of the contract impact the price of coverage.

Homeowners who use home service contracts find that there are a number of benefits associated with them. For example, many individuals enjoy the convenience of having a contract provider set up appointments with repair people once a claim has been report. Others value the sense of security they gain in knowing that most damage to necessary appliances can be repaired without fear of high costs. Consumers who are trying to sell their homes may feel that these contracts can heighten the value of their property since they may be guaranteed repairs to damaged appliances that come with the house.

Some consumer agencies and experts believe that providers of home service contracts can intentionally mislead clients and even behave fraudulently. These complaints most often occur when consumers sign contracts without understanding the limitations because they are hidden or undisclosed. On the other hand, many proponents of these contracts argue that while some providers may be fraudulent, in most cases it is a consumer's responsibility to learn the limitations and terms of a contract before agreeing to it.

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