If you’re buying a newly constructed home, the builder may provide a warranty with the purchase. But home warranties aren’t just for new construction—you can buy one for a non-new home, too, as long as all systems are currently working. Like a warranty that comes with an automobile or appliance, home warranties are issued in writing and specify the terms of coverage and how to file claims.
Coverage Terms
The terms of a home warranty define the coverage period, the home elements that are covered, and any exclusions. A home warranty will define parts or repair cost limitations and fees, if any.
Filing Claims
A home warranty also details where the homeowner must file a claim, how the claim must be filed, and the responsibilities of the warrantor, or home warranty company. If a system fails or you notice a defect in your house, read the warranty to find out if it’s covered, whom to contact, and when you need to file. For instance, if an air conditioning system fails and that system is covered under your home warranty, you would contact the warranty company and request a repair or replacement. The company would arrange for a technician to come to your home to make the repair, and you would pay a trade call fee, as defined in the terms of your contract. In some cases, your warranty company may not cover the entire replacement cost.
How Does a Home Warranty Differ From Homeowners Insurance?
A home warranty doesn’t eliminate or diminish the need for homeowners insurance, although coverages may overlap. For example, your homeowners insurance and home warranty may both cover a collapsed ceiling but not a broken oven that’s out of warranty. A home warranty, on the other hand, might cover the oven.
Where To Get a Home Warranty
Home warranties are available for new and existing homes from a number of companies, which typically offer various home warranty plans. Some builders provide warranties on the new homes they construct, while other builders purchase warranties from independent companies. You can also buy third-party home warranties to supplement the coverage the builder’s warranty provides. State laws also set home warranty requirements. For instance, New Jersey requires builders to provide a home warranty on all new homes.
Warranty Limitations and Fees
Some home warranties set limits on certain types of repair or replacement costs. For instance, here’s an example of a First American home warranty’s limits for homes in Arizona:
Costs
The average cost for a basic home warranty is $300 to $500 per year. The cost of a plan depends on several factors, including the home size, type of residence, and the types of systems covered. For example, First American’s Home Warranty of America offers three plans for southern Arizona homes. The plans range in price from $375 to $535 for a single-family home. The price goes down for condos, townhomes, and mobile homes: $330 to $470.
Pros and Cons of Home Warranties
Pros Explained
Convenience: With a home warranty, the warrantor will dispatch a service provider to your home, saving you the time and effort of finding a repairperson.Peace of mind: When you purchase a home warranty, you don’t have to worry about major unexpected expenses for covered systems. Depending on the coverage you purchase, a home warranty may cover your home’s most costly systems, such as heating and air conditioning units, hot water heaters, and kitchen appliances.Set fees (some warranties): Some home warranties offer set service fees. You pay a monthly or annual coverage fee, but when you need to repair or replace a home system, you only pay the trade call rate defined by the contract.Available for older homes: Third-party home warranties, which you can buy for a new dwelling or your current home, offer broad protection and flexibility.
Cons Explained
Overlapping coverage: Some home warranty plans may overlap with your home insurance policy, meaning you pay twice for similar coverage.Exclusions and limits: Damages caused by “acts of God” such as lightning or storms usually aren’t covered by home warranties.Lack of control: The home warranty company, not you, will decide who repairs or replaces your covered system. The warrantor will also decide if your faulty home component is repaired or replaced, and with what materials.
How To Get a Home Warranty
If you purchase a newly constructed home, it may come with a builder’s warranty that provides limited coverage for up to 10 years on some systems and components. You can purchase a third-party home warranty at any time. However, you may get a better rate if you purchase a warranty during closing. Some title companies offer home warranties through third-party companies, while others provide their own warranties. If you’re buying a home with new systems that are covered by manufacturerwarranties, you might not need a home warranty. On the other hand, if you’re buying an older home with old systems, or you already live in one, a home warranty can protect you in case of future breakdowns and help you avoid large out-of-pocket replacement costs. Home sellers often include a home warranty in the sale price because it offers a certain degree of liability protection and often makes the home easier to sell. You may require the seller to pay all warranty costs, or negotiate for them to split the expense with you. If you purchase a home already covered by a warranty, ask the seller to transfer the contract to you.
