Do You Need a Home Warranty?
If you buy a silk blouse and the sleeve falls off after just one wearing, you’re likely to get your money back — or at least an exchange — from the retailer who sold it.
If you buy a house and the furnace stops working two weeks after you move in, you’re out of luck — unless you purchased or received a home warranty.
Two products — the home warranty and the builder warranty — can take some of the worry out of buying or selling a home. These warranties typically insure appliances and major systems in a home, whether it’s new or just new to you.
Builder warranties
Most builder warranties cover a new home’s materials and workmanship for one to two years, with coverage that lasts up to 10 years on major structural elements.
Rules vary from state to state, but generally these warranties only apply to the sale of a new home from the person or company that constructed it, to a new owner-occupant. Your state attorney general’s office can help you determine whether your builder is offering all the warranties required by state law.
Home warranties
A homeowner who gets a builder warranty with the purchase of his new home may also opt to add another layer of coverage by purchasing a home warranty. Additionally, home warranties can provide protection for those buying older homes. Home warranties generally cannot be purchased for mixed-use properties or mobile homes.
A basic one-year warranty can cost as little as $200 and will generally cover plumbing, heating and some appliances. The price of a warranty will increase as additional items and coverages — such as a swimming pool, washing machine or garage door opener — are added.
Home warranties may be purchased by sellers, who often add them to their closing costs, but they may also be purchased by buyers. Some real estate agents will give buyers a home warranty as a gift at closing.
Home warranties are not the same as homeowners insurance. Insurance protects against perils including fire, hail, property crimes and certain types of water damage. A home warranty does not cover these perils but, rather, covers specific components of the home.
A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on named items. When something that is covered by a home warranty breaks down, the homeowner calls the home warranty company, which dispatches one of its contracted service providers to examine the problem. If the necessary repair or replacement is covered by the warranty, the homeowner only pays a small service fee (in addition to the money already spent to purchase the warranty), and the service provider completes the work.
If you’re thinking about purchasing a home warranty, do your homework. Shop around for the coverage and pricing that best fits your needs. Ask the warranty company:
- What is covered?
- What is excluded from coverage?
- When does coverage begin? Some companies provide coverage on closing day, while others don’t take effect for two weeks to a month.
- How long does coverage last?
- What is the claim-filing process?
- Is there a cost to file a claim?
Knowing your warranty options and doing your research ahead of time can provide peace of mind when moving into your new home.
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