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Top Rated Learn About Home Warranties

A home warranty is a contract that you can purchase that guarantees the repair or replacement of certain appliances or systems in your home. Home warranties, also known as residential services contracts, are available for both newly constructed homes and existing homes. Many home owners opt to purchase a home warranty plan in order to protect themselves against the cost of future home repairs and to provide them with peace of mind. Home warranties can be can be purchased from your local insurance dealer or from private home warranty companies.


Types of Home Warranties

There are actually two types of home warranties: new home warranties and existing home warranties.

New Home Warranties
New home warranties cover certain systems that are installed in a newly constructed home. They are purchased by the builder of the new home and then included in the sale price of the house. These home warranties generally last for a period of seven to ten years, and will cover the repair or replacement of items including:


  • defects in workmanship and materials
  • structural damage (foundation or roof problems)
  • wiring
  • plumbing
  • heating and cooling systems
  • major appliances


Existing Home Warranties
Existing home warranties cover buyers of homes that were preexisting at the time of sale. These warranties can be purchased by the buyer of the home in order to protect against future repair and replacement costs, for a period of up to one calendar year. Alternatively, they can also be purchased by the seller of the home and included with the sale, as a purchase incentive. These existing home warranties cover repair and replacement costs of items including:




How Much Do Home Warranties Cost?

Home warranty costs fluctuate depending upon the type of coverage you have and the warrantee company you are using. There are typically three costs involved in your home warranty:


  • Initial Purchase Cost: To purchase a home warranty plan that covers one calendar year, it typically costs between $250 and $400. This provides repair and replacement coverage for all standard appliances and household systems. If you have bought a newly constructed home, the initial cost of the home warranty will be included in the price of your home.
  • Extra Coverage Costs: Extra coverage (for items like pools, spas, and trash compactors) can be purchased at an additional cost. These items typically cost about $30 per year to cover under a home warranty.
  • Copayment Cost: All existing home warranties require the home owner to pay a deductible every time he or she makes a claim. This deductible is used to pay the repairman or contractor who repairs or replaces the damaged item. Copayments typically run from $30 to $50 per claim.


Are Home Warranties the Same as Home Insurance?
Many people get confused about home warranties, and assume that they are the same as home insurance. However, the two are actually very different. A home warranty merely covers the cost of repair or replacement of systems in your home, which have broken due to mechanical failure. Unlike home insurance, a home warranty will not cover damage caused by:


  • fire
  • flood
  • earthquake
  • wind



Benefits of Purchasing a Home Warranty

There are a number of benefits to purchasing a warranty for you home, whether you are buying or selling.

Benefits for Sellers:
A home warranty plan often helps to entice reluctant buyers into making an offer on a home. They are also relatively inexpensive and don’t have to be paid for until the closing date on your sale.

Benefits for Buyers:
Home warranties can offer great peace of mind, especially if you are buying a home that is more than ten years old. Home warranties can save you from having to pay replacement costs for old appliances or heating and cooling systems. And if you can’t afford to buy one yourself, you can use it as a bargaining tool when making an offer on a home.


Drawbacks of Purchasing a Home Warranty

Unfortunately, home warranty insurance plans aren’t perfect and won’t solve all of your home repair woes:



  • Home warranties aren’t a good investment for those buying a house that is less than ten years old and unlikely to need repairs.
  • The warranty only lasts for one year on existing homes and the renewal cost tends to be more expensive than the initial purchase cost.
  • Some home warranty companies don’t provide superior service.
  • Big ticket items, like your foundation and roof, aren’t generally covered by home warranties.



Do You Need a Home Warranty?

Not everyone needs home warranties, but they can be beneficial for some homeowners. Consider buying a home warranty if:


  • you are buying a house that is more than ten years old
  • the cost of copayments and the initial price of the warranty will be less than future repair or replacement costs
  • you are looking for peace of mind when it comes to potential household problems