You’re probably familiar with the warranties your electronics came with – those convoluted promises it’s impossible to make a claim under. A home warranty is not exactly the same, and it can be issued on a house of any age. If you’re a new owner, you should get one. Current owners should consider it.

What a Home Warranty Is
A home warranty is a service contract on the appliances and systems in your house. If your dishwasher breaks down, you can file a claim under the home warranty to have it repaired or replaced. You’ll have to pay a service fee for the initial visit to diagnose the problem.

What It Includes
The warranty is not for items like the foundation or roof, although you may have a separate warranty for these if you’re buying a home directly from a builder or the home was built very recently. If you have an older home, those items would be included in the homeowners insurance policy. This warranty typically covers the systems, which are often excluded by your insurance policy:

  • HVAC
  • Appliances
  • Water Heater
  • Plumbing
  • Electrical

Before buying a policy, review it carefully to make sure the systems in your home are included. For example, well pumps aren’t usually automatically included. If your systems aren’t included, ask if there’s a policy or add-on that does include them.

How Much You’ll Save
It depends on the problem. If it’s a minor problem, your service fee may cover the cost of the repair. However, if it needs replacing, you could save thousands of dollars on a new heating system or major plumping repairs.

How to Get a Home Warranty
If you’re shopping for a home, include the home warranty in your offer as one of the items paid for by the seller. The seller may not agree to this cost, but most will. If the seller won’t, you can buy it yourself. Some real estate agents will buy it as a gift for you at closing.

If you already have a home, you can add a home warranty at any time. You can renew it annually.

Warranty Costs
The cost of a home warranty varies by region. It can be as low as $250 and as high as $500. Service fees also vary by region and service, but can range from $25 to $100. If you have a new appliance with an existing warranty, that should be your first call. However, if you have an older appliance, the home warranty may extend the coverage without the added expense of an appliance-specific extended warranty. As someone who spent a year fighting a major appliance dealer to have the extended warranty honored, I can tell you the high cost of the extended warranty isn’t worth it. Just get the home warranty.

Why New Owners Need It
If you’ve been living in your home a while, you know the issues that generally occur and about what it costs to fix them. You know how old your systems are and when you can expect to replace them. As a new owner, you don’t always have this information, and haven’t had time to save up the money for the needed repairs or replacement. You don’t want to be five months into your new home and discover the heating unit has broken at the start of winter, and then have to come up with $2,000 to fix it.

Even though it seems like one more expense to add to an already expensive process, a home warranty is key for new h

Comments

One Response to “What Is a Home Warranty?”

  1. Brian R. on June 30th, 2009 2:01 pm

    Good primer on home warranty. There are 2 things I would add though: Home warranties come with more restrictions than home owners insurance. For example, pre-existing conditions and maintenance (lack of) problems are almost always NOT covered. Secondly, there are many fraudulent companies out there as this industry is not regulated at all. Check reviews against the insurance provider before buy a policy. http://www.homewarrantyreviews.com/reviews is a good resource to run a background check against the insurance company.

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