Home Warranties Part I: What home buyers, sellers, and homeowners need to know
We often get many questions in real estate from our home buyers and sellers about home warranties – ‘what are they’, ‘what do they cover’, ‘are they worth it’, and many more. So, we put together a list of common questions and answers, and a few tips to help all homeowners who are considering a home warranty.
In part one of this series we’ll cover the basics of home warranties, what they cover, and if you should consider one for your home. In Part II of the series, we’ll explore the costs of home warranties, options for purchasing home warranties, as well as tips for how to shop for a home warranty.
Let’s get going!
Home Warranties – what are they and how do they work?
What is a home warranty?
A home warranty is basically a service contract that helps homeowners cover the cost of repairs or replacement for major home systems and appliances inside the home. Items typically covered include your HVAC (AC and heating), indoor plumbing, water heaters, indoor electrical, and major appliances such as washer, dryer, stove, oven, and refrigerator. A more comprehensive list can be found below.
How does a home warranty work?
Home warranty providers vary depending on what they cover, but most have tiered pricing for plans to suit the needs of most homeowners. After you select a provider and plan (more on this below), you will pay an annual premium for coverage which averages around $350 to $600 per year.
When a covered appliance or system stops working or breaks, you call the home warranty provider and describe the issue. The home warranty provider will then select a service contractor from their pre-qualified list of contractors to handle the problem. The service contractor calls the you, the homeowner to schedule the service call.
Depending on the type of plan you signed up for with the home warranty provider, you will usually pay some type of service call fee ranging from $50 to $100. You pay this each time you have a service call for a new issue.
What is the difference between a home warranty and home insurance?
While both home warranties and insurance both help cover unexpected expenses – they are very different. Homeowners insurance covers things like damage to your home due to floods, fires, storm damage, or accidents. Homeowners insurance policies are purchased when buying a home and are required by lending agencies.
On the other hand, home warranties are designed to cover the working parts of your home that would normally result in a service call from a licensed professional such as a plumber or electrician. The home warranty covers items due to normal wear and tear in usage. If you don’t have a home warranty, you would pay the licensed contractor the full cost of repairing or replacing the item in question. Examples could include your AC unit that won’t cool, or your washing machine that started making weird knocking noises.
What is usually covered under a home warranty, and what is not covered?
What is covered in a home warranty plan?
While most home warranty providers offer tiered programs, these items are usually covered in a basic plan. It’s up to you to check coverage carefully as this list may change from one provider to the next.
- Washers and dryers
- Stoves, ovens and surface-top cooking appliances
- Garbage disposals
- Built-in microwaves
- Refrigerators (policies differ – check this one closely)
- Heating and cooling systems (HVAC)
- Water heaters
- Indoor plumbing
- Indoor electrical systems
Some plans allow you to buy add-on coverage for items such as:
- Pool equipment such as pumps and motors
- Spas and Jacuzzis
- Additional appliances (extra refrigerator in garage as example)
- Large freezers
What is usually not covered in a home warranty plan?
Every provider is different but many of the items below may excluded from basic home warranty coverage plans. Some of the items below may be covered under homeowner’s insurance.
- Problems that are pre-existing and/or discovered during a home inspection
- Improper maintenance (this is a big one and may be used by less reputable companies to deny payment)
- Garage doors and tracks
- HVAC systems or appliances that are not up to standard code
- Structural damage such as foundation, doors, windows, and walls
- Outdoor plumbing such as sprinklers, faucets or valves
- Extra appliances
Is a home warranty right for you?
While a home warranty plan can be a wonderful thing for some, it’s not for everyone. Check out this list of considerations before purchasing a home warranty plan.
Who should consider a home warranty?
- First-time home buyers
- Older homes and appliances
- Home builder’s warranty has expired
- Tight budget and do not have savings or funds set aside for large repairs
- Don’t have time, patience or skills for DIY or messy projects
- Home sellers – good perk for prospective buyers
When are home warranties not worth the cost?
- Brand new homes, new construction – your builder’s warranty provides coverage
- Have all new appliances and home systems (example: recent remodel)
- Have adequate funding stashed away for unexpected events
- Buying a new home and the seller providing allowances for all new appliances
- Don’t like the fuss of repairs, would rather just go buy new
So, there’s our rundown of home warranty basics. Be sure to check out Part II of this series where we’ll dive into the money side of home warranties and provide tips for how to shop and purchase a home warranty.
And, if you are thinking about home warranties, give us a call about our Service Provider Guide that we publish every year. We list professionals and contractors for services homeowners need that have either been personally used by us or recommended to us by a trusted client or colleague. Or, if you’re just starting to think about buying or selling a home, we can help with that too! Call us anytime at 469-634-0932.
About the Judi Wright Team
Judi Wright/The Judi Wright Team is a real estate group specializing in the suburbs of Frisco, Plano, and surrounding areas. Named the “Best Realtor in Dallas,” by D Magazine thirteen times and a Five Star Realtor with Texas Monthly eight times. Judi is also a Company-Wide Top Performer with Ebby Halliday, a Berkshire Hathaway affiliate.