Have you ever see a home put on the market that included a Home Warranty?  What does this mean?  If the sellers are willing to give you a home warranty does this mean there is something wrong with the home you are considering? The short answer is No.  A home warranty is insurance or home protection that helps to protect the buyer, and the seller from any unseen expenses that could arise.

So what exactly is a home warranty?

To explain what a home warranty is we should start by explaining what it is not. A home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home from the breakdown of a home appliance or component.  A home warranty covers you during the sale process and typically up to a year after closing.  Your home warranty can then be renewed on a yearly basis.

What Does It Cost?

The cost of a home warranty is typically a few hundred dollars a year, paid up front (or in installments, if the warranty company offers a payment plan). The plan’s cost varies depending on the property. You will typically pay more for a warranty on a single family detached property than you will for a condo, townhome, or duplex.  The cost usually does not vary with the property’s age, unless the home is brand new, which increases the cost of coverage. The home’s square footage also does not affect the price in most cases, unless the property is more than 5,000 square feet. Separate structures, such as guest houses, usually are not covered by the basic policy, but can be covered for an additional fee.  Garage units are typically covered by the policy however.

The Benefits of a Home Warranty

Like all warranties, a home warranty is protects you against expensive, unforeseen repair bills and provide peace of mind. For a homeowner who doesn’t have an emergency fund or who wants to protect their emergency fund, a home warranty can act as a buffer. Home warranties also make sense for people who aren’t handy or who don’t want to worry about tracking down a contractor when they have a problem. Warranties can also make sense for people with expensive taste in appliances.

Is a Home Warranty for me?

A home warranty can be a great solution to the risks homeowners often face. However, before purchasing one, homeowners should read the fine print in the home warranty contract and contact their real estate agent for advise. Home sellers who want to offer a warranty to buyers and homeowners/buyers who would feel more comfortable having a home warranty should also do careful research to find a reputable home warranty company that will pay for legitimate repairs when they are needed.

Have you ever purchased a home warranty? How did you like it? Have you ever wished you had a home warranty when you had an expensive repair bill? Let us know in the comment section below.


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