What Is A Home Warranty?

If you are considering buying a home, condo or townhouse, then you should
know about home warranty plans.

The term Home Warranty is used to describe a variety of products. In some
situations, new homebuilders use the term to describe the standard coverage
they provide on items in a new home. In other contexts, it is used to
describe an insurance policy purchased by a homebuyer or home seller to
cover items on a resale home (not new construction).

In this article, we are referring to the later type of policy -a policy
purchased by a homebuyer or home seller for a resale home. In this context,
a home warranty is a service contract to maintain or repair, when needed,
certain items in a home, condominium or townhouse. This type of warranty is
an option for buyers wanting more coverage beyond items normally covered in
a homeowner's insurance policy. Home sellers sometimes purchase this type of
policy and offer this as an incentive to homebuyers to purchase their home.

If a repair is needed during a covered period for items that are covered,
then the homeowner simply contacts the Warranty Company to request service.
The Warranty Company will send out a qualified professional to repair the
item. The homeowner will usually have to pay a small deductible for a
service call, and the warranty company covers the rest.

The home warranty industry is a competitive business and items covered and
costs vary from company to company. In general, many home warranty policies
cover: plumbing, heating, electrical system, water heater and major
appliances, such as range/oven/cooktop, dishwasher, and garbage disposal.
Policies are typically issued in one-year intervals, with the option to
renew at the end of the year. The cost of a policy varies from $200 per year
for a small home, condo or townhouse, up to $1000 or more for large
properties with expanded coverage.

So should you get a home warranty? The answer is it depends on the condition
and age of the home, your financial situation, and your level of risk
tolerance. A warranty may be a good idea if you are buying an older home
that is in poor condition.
However, if you are buying a newer home in excellent condition, then you may
decide that there is less risk.

In making your decision, be sure you carefully evaluate your financial
situation and determine if you have the means to pay for a major repair
should some costly item in the home need repair or replacement. You should
also carefully evaluate your homeowner's insurance policy to determine what
items are already covered. A good home inspector can provide you a through
evaluation about the condition of a home and it's major systems before you
sign a home purchase contract. This information will help you decide on
whether or not to purchase a warranty policy.

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