A home warranty is not the same as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes, and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. On the other hand, a home warranty is a separate contract covering repairs and replacements of systems in your home, typically for a period of one year. (Note: If you’re buying new construction that has never been lived in before, the builder will usually offer a one-year warranty, and after that, a home warranty kicks in for a certain period.)
What does a home warranty usually cover? Policies differ based on which company your warranty comes from, but in general, a home warranty will cover your home’s appliances and systems such as electrical and plumbing. The home warranty usually does not cover exterior issues such as the roof, water intrusion due to roof problems, fencing, decking, landscaping, or anything in a detached garage. The cost and coverage of a home warranty can vary widely, so always compare policies before purchasing. Typically, home warranties range from $325 to $700 and are valid for one year from the purchase date. Also, while home warranties cover many of your new home’s crucial systems and appliances, those items must be in working order before the contract is entered into with the warranty company.
When you buy a home warranty, consider premium and optional coverage to customize the plan to fit your needs, especially if your home has more than one oven, dishwasher, wine fridge, etc. These extra appliances may not be covered under the standard warranty.
Who pays for the home warranty? That depends. Sometimes, we negotiate for the seller to provide a home warranty as part of the contract negotiations. In that case, the home warranty would be provided and paid for by the seller, and you would receive the details of the home warranty at the closing. If a home warranty wasn’t requested as part of the contract, you will need to decide whether to purchase one separately.
How much does a home warranty cost? The cost of a home warranty depends on several factors, such as the age of your home, its size, and what systems you want covered. The cost generally ranges from $500 to $1,000. In addition, if something breaks and the home warranty company needs to come out, there is usually a service call fee of approximately $75 per visit. With most warranty programs, there are no additional fees for repairs beyond the service call fee.
What if an appliance can’t be repaired and needs to be replaced? The home warranty company will typically attempt to repair the appliance first. If that doesn’t work and the appliance needs to be replaced, they will usually replace it with a model that has similar features. For example, if you have a refrigerator with an ice machine and a water dispenser, the replacement will have similar features. However, it most likely won’t be the same brand. For example, American Home Shield generally replaces all appliances with a GE brand. Therefore, if you have a high-end fridge like SubZero, you’re most likely not getting another SubZero. Instead, you’ll receive a GE fridge with similar features. If you insist on a SubZero, many warranty companies will give you the cash equivalent for the GE fridge, which you can apply toward purchasing the SubZero yourself.