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    Home»Buying a House»5 Things you May not Know about Home Warranties
    Buying a House

    5 Things you May not Know about Home Warranties

    January 21, 2021
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    If the home inspection leaves you less-than confident that the home you really, really want to buy won’t need repairs in the near future, you may want to ask the seller for a home warranty.

    You’re not alone, by the way. The home warranty industry rakes in more than $2.5 billion each year from people just like you — new homeowners seeking peace of mind.

    Home warranties provide just that when it comes to the life expectancy of the home’s major systems. Some experts say that peace of mind is an illusion for those who don’t understand how the warranties work.

    Read on to learn the five things you need to know about home warranties.

    1. Home warranties are service contracts

    Many new homeowners think of their home warranty as a type of insurance. It is not.

    Furthermore, the federal government considers a warranty something that is included in the purchase price of the item. A home warranty is purchased separately, so it isn’t technically a warranty.

    “Simply put, a home warranty is a yearly service contract that protects specific home systems and appliances,” according to the folks at First American Home Warranty.

    2. Understand what’s covered

    What your warranty covers depends on several factors, including the price of the warranty. The more expensive the warranty, the more it will cover.

    The basic home warranty provides some coverage for the major systems in the home, such as heating, cooling, electrical and plumbing.

    The home’s major appliances may also be covered.

    3. Find out what’s not covered

    “There are plenty of limitations; these plans generally don’t cover non-mechanical items such as windows or the structure of your home, for instance,” say the experts at ConsumerReports.com.

    Unfortunately, exclusions (anything that isn’t covered) aren’t uniform across the home warranty industry. Most, however, won’t cover any repair or replacement of a problem caused by “normal wear and tear,” insect damage, deferred maintenance and acts of God.

    This leaves the companies with a lot of wiggle room when it comes to accepting or denying a claim.

    Some companies offer additional coverage for some of their exclusions, at an additional cost, of course.

    4. Then, there is optional coverage

    Optional coverage is the term home warranty companies use to describe coverage that you can purchase for certain systems, such as a pool and spa, septic, central vacuum or well.

    If the home features any items not covered and you want coverage, ask for a policy that offers these options.

    5. Is a home warranty worth the price?

    “The average cost of a home warranty service contract ranges between $300–$600 per year,” according to Jessica Render at ConsumerAffairs.com.

    When you need to use the warranty, and the problem is covered by the home warranty, the provider will send a service technician to your home. You are required to pay for the visit, which will run you between $50 to $100 per visit, according to Render.

    Is the cost worth it? It depends. Many in the real estate industry feel that the peace of mind a warranty offers the new homeowner, who is typically cash poor for at least the first year of homeownership, is invaluable.

    Consumer Reports and other consumer advocates feel otherwise.  “We recommend avoiding service contracts . . . far too often, warranty claims are denied because the company says the problem was pre-existing. Or, the claim is denied because the consumer can’t prove that a broken item was properly maintained,” says Anthony Giorgianni with Consumer Reports.

    “Put your money in the bank instead,” he suggests.

    If you do decide to go ahead with the purchase of a home warranty, check each company’s Better Business Bureau ranking and keep records of all home maintenance tasks you perform.

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