A home warranty protection policy is usually underwritten by an insurance company, either directly through its home warranty administrator units, or through a third-party administrator like OnPoint Warranty. Home warranties are priced using a loss cost calculation, which is similar to service contracts and extended warranties. Premiums are held in accounts to cover unforeseen losses and their thoughts about the company.
The insurers pay for the cost to repair or fulfill other aspects of the contract from the reserve when warranty events occur and are managed by the warranty plan administrators. With well-planned reserves, all future repair costs incurred by warranty plans, service contracts, or extended warranties can be covered in full. It is not uncommon for home warranties to be licensed differently than service contracts in some states, including in terms of both administrator and obligation licensing. In addition, some states limit the businesses that can take part in the sale of a home warranty, so finding a licensee or using an obligor/administrator is essential to comply.
Home warranty administrators and obligated parties
Obligors are entities that owe something to another person the oblige or organization the obliged via contract or law. An obliged individual is a person who must receive the benefit of such an obligation on their thoughts about the company. Home warranty plans, such as service contracts or extended warranties, entail obligations to pay for services rendered.
There are two types of licenses in the United States the administration license and the obligor license. An administrator can either be an obligor or an administrator. Home warranty administrators in some states must be registered to provide coverage. Although they provide coverage, they are not legally obligated to pay for the services. Some states require bonding as well as a significant amount of information regarding debtor licensing.
Home Warranties vs. Extended Warranties
Previously we mentioned that warranties like manufacturer warranties and extended warranties as well as service contracts offer consumers the promise of repair services. Home warranties aim to enhance the entire homeownership experience for consumers, unlike a manufacturer’s warranty that is limited to simple break-fix services. Additional coverage is provided by home warranties, including coverage for HVAC, ducts, plumbing, and electrical systems, as well as pools and spas.
They’re regulated and licensed slightly differently in some states, and have deductibles and claim limits specific to a product or repair event or a contract term. Home warranties cover new homes on the day they are delivered, but they don’t pick up the repair responsibilities until the manufacturer’s or builder’s warranties have expired. Manufacturer warranties cover products from the date of sale during the stated term, while home warranties cover new homes from day 31.
Renewal coverage is available up to the age of the home or product for existing homes, but there is usually a 30-day waiting period.
