Home Warranty Q&A

What is a home warranty and what does it cover?
A home warranty is essentially a service contract for home owners that, in its base version, commonly covers repair or replacement of appliances and heating and cooling systems. There may be more expensive versions of the warranty that offer more inclusive coverage. In addition, coverage of other items such as pools, hot tubs, septic systems, etc. may usually be added at an additional cost.

What do home warranties cost?
Basic plans cost in the mid $400s. Upgraded plans are closer to $600. Some companies charge more or less, depending on the size of the house or the part of the country your home is in. Home warranties are often purchased for homes that are being sold, but may also be purchased by homeowners that are not moving.

What's the difference between a home warranty and homeowner's insurance?
A home warranty covers appliances or mechanical systems in a home that fail due to normal wear and tear. For example, if your garage door opener, refrigerator or freezer stop working then repairs or replacement would be covered by a home warranty, depending on the specifics of the warranty. Homeowner's insurance covers the home and its contents against loss caused by various perils including fire, theft, failure of internal systems such as a water heater that result in damage to the home, etc. For example, if lightning strikes the home or hail stones break the windows or the home catches on fire then the resulting damage--as always, depending on the specifics of the policy--would be covered by your homeowner's insurance.

Do I want a home warranty on the home that I'm buying?
Yes, most definitely, in my opinion. In my experience, it is frequently the case that when a property changes hands a system or appliance shows the need for repair not long after. You might think that the condition necessitating the repair should have been discovered during a home inspection, but inspectors don't catch all problems. Also, new owners may engage in different patterns of use that result in malfunctions occurring. In any event, when one moves into a new property there are usually expenses associated with moving, possible renovations, etc. A home warranty provides valuable piece of mind in this case.

Should I offer a home warranty to potential buyers of my home?
In general, it is a sound marketing strategy to offer a home warranty to potential purchasers. Such warranties are valued by buyers as they cap possible expenses. Also, in a competitive market, you need to put your home in the best possible light to ensure a sale. The cost of a warranty can easily be offset by a higher sale price or a shorter marketing period for your home. Some sellers purchase a home warranty that covers the home during the marketing period and then covers the home for the first year after purchase.

What gotchas are associated with home warranties?

• The devil's in the details with home warranties. You need to read the warranty to know what is and isn't covered.
• In some cases, claims cannot be made for some period after the warranty is purchased. If the warranty is paid for as part of settlement there will be a lag time until the check reaches the warranty company. You may be limited in the number of claims you can make during this period.
• There is usually a $75 - $100 charge to the warranty holder for each service call made by a repair technician.
• In certain circumstances, coverage may be denied because of a preexisting condition or because normal preventive maintenance has not been performed or because a system was not installed in accordance with local building codes.