A home warranty is a policy that covers the cost of repairing many of your home appliances if they break down.
“Home warranties provide financial protection for homeowners who might be faced with unexpected problems with their appliances,” explains Shawna Bell of Landmark Home Warranty.
Many people buy a home warranty when they close on a home since it provides peace of mind from unexpected expenses.
1. What does a home warranty cover?
Don’t mistake a home warranty for homeowners insurance, which covers your home’s structure and belongings in the event of a fire, storm, flood, or other accident. A home warranty, in comparison, will cover repairs and replacements on systems and appliances due to normal wear and tear—no calamities required.
A home warranty generally covers these items:
Heating and cooling systems
Washer and dryer
Kitchen appliances such as the oven, range, and garbage disposal
2. How much does a home warranty cost?
While home buyers are often required to get homeowners insurance along with their mortgage, home warranties are a fully optional purchase. Basic coverage starts at about $300 and goes up to $600 for more comprehensive plans, says Bell. A homeowner can add extras if needed, such as coverage for a swimming pool or an external well.
“The warranty plans offered at the time of the real estate transaction typically offer the most comprehensive coverage and price points, making it the optimal time to lock it in,” Bell says.
3. Benefits for buyers and sellers
A home warranty benefits to home buyers by providing reassurance that they can move in without worrying about paying for surprise repairs.
A home warranty can also benefit sellers since it covers these elements during the listing period; some companies even offer free seller’s coverage during this time with the hopes that the buyer will decide to continue the coverage. Oftentimes, home sellers will offer to pay for the first year of a buyer’s home warranty to entice buyers to bite.
Not everyone thinks home warranties are worth the cost. Typically they aren’t necessary with new homes since appliances are already covered under manufacturers’ warranties. However, the older your home, the greater the odds you’ll need a repair and the wiser it is to get a home warranty. Many companies don’t differentiate between newer and older homes in terms of cost, making a warranty an especially cost-effective option if you are purchasing an older home.
4. What to do if something breaks
If something covered under your home warranty breaks, call your provider and it will connect you with a local qualified contractor. Remember is that a home warranty doesn’t mean you’re off scot-free; typically you’ll have to pay for a service call or a certain amount of the bill up to your deductible first.
While not everyone agrees a home warranty is worth it, it’s a good idea for people who lean toward the “better safe than sorry” approach.