Home systems protection coverage for today's homeowners

When a major appliance or home system breaks down, it’s more than just an annoyance. Rising supply and labor costs have led to higher repair and replacement costs, an expense for which many homeowners are unprepared. Home systems protection coverage can protect homeowners against these unwanted costs and ensure they continue to benefit from the security, comfort and convenience their home systems provide.

What is a home system?

A home system is any large appliance or system within the home that is not part of the home structure. This includes air conditioning and heating systems, electrical service panels, garage doors and kitchen appliances. Homeowners often assume these systems are protected by service contracts, warranties or their homeowner’s insurance policy, but in most cases, they are not. The complexity of today’s home systems means repair and replacement costs can run well into the thousands. Insurance advisors should educate their customers on the importance of home systems protection coverage to ensure they are prepared for these unwanted expenses.

Home systems protection coverage is not new, although many homeowners are unaware of its availability. Coverage is widely available through both large national carriers and smaller regional carriers and pays for the repair or replacement of a wide range of appliances and equipment not covered by standard home and condo insurance. More importantly, it’s affordable. Coverage costs range between $20 to $100 for HO3 and HO6 endorsements, with the average cost between $25 to $50.

What’s covered under home systems protection?

Home systems protection coverage endorsements protect homeowners’ in-home systems and equipment from mechanical or electrical breakdowns and sudden and accidental loss. It does not cover small appliances, such as a coffee maker or toaster, and doesn’t provide coverage for losses due to wear and tear, including rust, corrosion, erosion, and deterioration or physical damage caused by an event such as a lightning strike or fire.

In addition to repair and replacement costs, paid losses include the cost of loss of use, expediting expenses for repairs, food spoilage and pollutant clean up.

The following examples show the cost benefit to clients with home systems protection policies:

1) Induction cooktop. While preparing dinner, a homeowner discovered his induction cooktop would not turn on. The repair person discovered the cooktop had experienced a control device failure which burned out all the heating elements. The cooktop was beyond repair and had to be replaced. The paid loss to the client after the deducible came to $2,050.

2) Freezer. A homeowner returned from vacation to discover her freezer chest had stopped working. The freezer’s cooling coils experienced an electrical breakdown, and all contents of the freezer were spoiled. Since replacement coils were unavailable, the freezer had to be replaced. The paid loss covered the freezer and spoilage. After the deducible, the paid loss totaled $4,950.

3) Furnace. A homeowner woke up and noticed his furnace wasn’t working. The repair person found it was due to a failed blower motor. Replacement parts were not available, and the furnace had to be replaced. Due to extreme temperatures, the insured needed to stay two nights in a hotel until a new furnace system could be installed. The paid loss covered the furnace and hotel expenses. After the deductible, the paid loss came to $9,846.

How homeowners benefit

Home systems protection coverage is becoming essential as consumers own more home systems than ever before. The complexity of the technology used to manufacture home systems is highly sensitive and has a limited lifespan. And, it’s become more costly to repair and replace these systems when issues arise. Extreme weather and hybrid work schedules place greater demand on these systems, adding to wear and tear.

Homeowners can gain peace of mind knowing they are covered for unexpected expenses. The low cost of HO3 and HO6 endorsements make it a no-brainer and can save them thousands should problems arise. For agents, home systems protection helps reduce errors and omissions liability and helps avoid difficult conversations when customers learn they are not covered under their standard homeowner’s DOE policy.

Agents should be proactive and reach out to customers and inform them about this important coverage. Share claim examples to educate homeowners about what is and isn’t covered. One option may be to roll coverage onto the existing book of business with a customer opt-out. These steps will help reduce customer anxiety and set you apart as a true trusted advisor.

Jim Hyatt is EVP and Chief Underwriting Officer of Arbella Insurance Group.  Contact him at james.hyatt@arbella.com.

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