Home warranty when buying a house (2024 guide)

What is a homebuyer warranty?

A homebuyer warranty is pretty much the same thing as a regular home warranty. It is essentially a service contract that covers the repair or replacement of many of the home’s crucial systems and appliances that break down over time. The only difference is that it’s geared toward people buying a home instead of those who already own one.

Unlike homeowners insurance, which covers damage from events like fires or storms, a home warranty deals with wear and tear of items like your HVAC system, electrical systems, plumbing and appliances.

Should I get a home warranty when buying a house?

Deciding whether to purchase a home warranty when buying a house depends on several factors. Here are some good reasons to consider a home warranty:

• Age of the home: Older homes have older appliances and systems that may be more prone to failure. A home warranty can cover the repairs and replacement of the hand-me-down appliances.
• Peace of mind: If you're looking for an extra layer of financial protection from unforeseen expenses right after buying a home, a home warranty could be worth considering. This is especially true if you don’t know how old the appliances are.
• Seller’s offer: Sometimes, sellers offer a home warranty as part of the deal to make the home more attractive to buyers. Typically, you don’t need to pay anything, and the warranty lasts 12 months after closing.

Can I get a home warranty after buying a house?

If you didn't decide to purchase a home warranty during the buying process, or if it wasn’t included with your home purchase, you can still buy one on your own. It can be acquired at any time to cover future appliance breakdowns and system failures.

What protection comes with a home warranty?

A home warranty typically covers the following:

• Major systems, including your home's HVAC, electrical and plumbing systems.
• Appliances like refrigerators and dishwashers, washers and dryers and sometimes even garage door openers.

Some plans will let you add extras like door lock rekeying, pool and spa coverage and roof protection.

Coverage can vary significantly from one warranty provider to another, so it's important to read the specifics of what each plan protects. Look out for any exclusions and understand the claims process and any deductibles or service fees involved.

How to choose the right home warranty company

Choosing the right home warranty company is crucial to ensure you get the coverage you need without any unpleasant surprises. Some key factors to consider, include:

• Reputation and reviews: Look for companies with good reputations in the industry. Online reviews, ratings from ConsumerAffairs and testimonials from other homeowners can provide insights into a company's reliability and customer service.
• Coverage options: Compare the different plans each company offers. Some might provide comprehensive coverage that includes all major systems and appliances, while others might offer more modular plans that allow you to customize what you want to be covered.
• Customer service: Good customer service is important, especially when dealing with home repairs. Check how the company handles claims and whether they are known for a straightforward and efficient process.

Common exclusions and limitations in home warranty contracts

Understanding what isn't covered by your home warranty is as important as knowing what is. Before you get a home warranty for your new home, make sure to understand these typical exclusions and limitations in the contract:

• Preexisting conditions: Most home warranties do not cover any problems that were present before the warranty started. This includes any defects or malfunctions that are known when purchasing the warranty or that are discovered by a technician.
• Improper maintenance: Home warranty companies don’t cover appliance or system failures caused by poor maintenance. For example, if an appliance breaks down due to years of neglect or failure to perform routine cleanings, it likely won't be covered.
• Cosmetic damage: Home warranties generally exclude cosmetic issues that do not affect the functionality or operation of home systems or appliances. This includes things like scratches, dents and superficial blemishes.
• Non-covered items: Every home warranty has a specific list of covered items. The company won't cover any appliance or system it doesn’t list. This often includes outdoor items (e.g., sprinklers), non-essential appliances (e.g., ice makers) or specialty systems (e.g., solar panels).
• Code violations and improper installation: If an appliance or system is not installed correctly or doesn’t meet local building codes, any resulting malfunctions or damages typically aren’t covered.
• Unusual wear and tear: Home warranties cover normal wear and tear but do not cover damage from abusive use, misuse or accidents.
• Commercial use: Appliances or systems used for commercial purposes, even if they are in your home, are usually not covered.
• Service fee: Most warranties require a homeowner to pay a service fee or deductible each time a technician visits your home.
• Third-party repairs: If a repair is done by someone the warranty provider doesn’t approve, the cost of these repairs will generally not be covered.
• Caps and limits: Many warranties limit how much they will pay per repair or contract term, which can affect the warranty's benefits if a major system or appliance fails.

How much does a home warranty cost?

The cost of a home warranty can vary based on the extent of coverage and the provider. Most basic home warranty plans cost between $450 and $600 per year, but prices can vary widely based on your location and the level of coverage you choose. Home warranties often require a service fee ranging from $75 to $150 per repair call. This fee is usually paid directly to the service technician.

How home warranty claims work

Filing a claim with your home warranty company should be straightforward. Here’s what you typically need to do:

1. Contact your warranty provider as soon as an issue arises. Most companies have a 24/7 call center for claims.
2. Be prepared to describe the problem and provide any necessary model numbers or documentation.
3. The company will arrange for a technician to come out and assess the problem. Follow their instructions and keep records of all interactions.
4. You’ll usually need to pay a service fee or a deductible during the appointment.

Advantages and disadvantages of home warranties

Like any product or service, home warranties have their pros and cons. The advantages include peace of mind, potential savings on expensive repairs and the convenience of having someone else handle arrangements for repairs. When it comes to disadvantages, the costs can add up if you never file a claim. Plus, exclusions and caps may limit benefits, and there may be frustrations if service expectations are not met.

Bottom line

A home warranty can provide some peace of mind when stepping into homeownership. It offers protection against the inevitable wear and tear of your home systems and appliances, protecting your budget from unexpected repair costs.

Whether you're just closing the deal on your house or have been living in your home for a while, a home warranty can provide financial predictability in your current chapter of life. Remember to consider your needs, evaluate your warranty options and choose a plan that best fits your new home.