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  • Writer's pictureJenna King


When purchasing a home, you may be asked if you’re interested in either purchasing or being gifted a home warranty. But what is a home warranty, and do you really need one? Let’s take a quick look at the pros and cons of investing in a home warranty.

What is a Home Warranty?

A home warranty isn’t the same thing as home insurance! A home warranty covers the repair and replacement service on items such as a furnace, air conditioning, even refrigerators and swimming pools. Home insurance provides coverage for your home’s structure and belongings in case of a disaster like fire or flooding. You purchase home insurance through an insurance company, while a home warranty is a contract between a homeowner and a home warranty company

If your oven refuses to heat or your air conditioning won’t cool, then you call the home warranty company who sends a service provider to access the situation. The service provider decides if the item needs repair or replacement and if it’s covered by the warranty.

How to Choose a Home Warranty

There are usually three home warranty plans to choose from: a plan for a particular appliance, a plan for all appliances, or a plan for appliances and your plumbing and electrical systems.

Items that are usually covered are:

  • Air conditioning

  • Kitchen appliances

  • Washers and dryers

  • Doorbells

  • Furnace/heating

  • Water heater

  • Ductwork

  • Garbage disposals

  • Inside plumbing stoppages

  • Ceiling fans

  • Electrical systems

  • Range and oven

You want to ensure that you are clear about what a home warranty covers before purchasing. Some home warranties may offer coverage for the refrigerator, but not the ice maker. Or your oven may not be covered if it malfunctions while in self-clean mode.

Some plans may offer to replace a broken item if it’s deemed too expensive to repair. The issue is that the company may only offer you the depreciated value of the appliance, leaving you with the rest of the payment to cover if you decide to repurchase that product.

The Cost of a Home Warranty

Homebuyers will often be offered a home warranty by the seller, or even as a closing gift from their realtor. A home warranty is a great investment if you’re purchasing a home and don’t know how well the furnace has been maintained, for example.

A home warranty usually costs somewhere between $300 to $600 annually. There are a few factors to keep in mind:

  • The premium is usually paid upfront, but some companies do offer payment plans.

  • The property type affects the cost—single-family detached, condo, townhouse, or duplex—and whether the homeowner purchases a basic or an extended plan.

  • The age of the home does not affect the cost unless the home is brand new, then the cost increases.

  • Square footage only affects the price if the home is more than 5,000 square feet.

  • Separate structures, such as guest houses, can be covered for an additional fee. Garages should be covered by the basic policy.

  • Every time a homeowner requests a service provider visit, the home warranty company charges a fee of $75 to $125.

A home warranty doesn’t protect against ever having to pay for home repairs. Some issues may not be covered by the home warranty, either because the homeowner didn’t purchase that specific coverage or because the company doesn’t offer coverage for it. Don’t forget about having to pay for the service call! A homeowner also has to pay the service fee or part of the bill up to the home warranty’s deductible.

Home warranties can still be a great investment, it’s good to know all the costs upfront. If you have any questions about whether or not a home warranty is right for you, your Realtor can easily help you assess!

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