Learn about home warranties and how they differ from home insurance.
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You’ve moved in. You’ve unpacked (most of) your boxes. You’ve figured out about half of the light switches. You are well on your way to conquering that new house checklist.
Before declaring victory, consider what you need to do to protect your home. You probably purchased homeowners insurance while processing your mortgage paperwork. But beyond that, what else is needed to cover your assets?
This is where a home warranty comes into play. Home warranties can be a good option for new homeowners, but it’s important to fully understand what they are – and what they can and can’t do – before purchasing.
So, without further ado, let’s define a home warranty and answer some common questions.
A home warranty is like an insurance policy for appliances and home systems, such as refrigerators, plumbing, water heaters and even garage door openers. A home warranty covers items that you purchased in good condition but sustained normal wear and tear.
Let’s say you move in and a year later your HVAC system goes on the fritz. That could cost you thousands of dollars to repair or replace. If you have a home warranty, you might only pay a fraction of the cost before it’s fixed (more on costs later). A home warranty can save you time that would have otherwise been spent searching for a certified repair person.
Homeowners insurance helps to cover structural damage and loss of personal property from calamities such as theft or fire, while a home warranty covers repairs and replacements of appliances and home systems due to regular wear and tear. Homeowners insurance is required when purchasing a home via a mortgage, whereas home warranties are optional.
For example, if your stove isn’t working because it’s 15 years old and it’s reached the end of its rope, you’d use your home warranty. But if damage from a fire caused your stove to malfunction, that’s where your home insurance would help.
Home warranties can certainly be beneficial, but they aren’t always necessary.
For instance, if you’re buying a newly built home or the previous homeowners just recently replaced or updated appliances, you shouldn’t expect to have any major malfunctions. On the other hand, if the home and/or its appliances are on the older side, it’s worth considering a home warranty, especially if there were any red flags during your home inspection. Sometimes sellers will even throw in a home warranty as a perk to give prospective buyers peace of mind.
While home warranties have many benefits, they have some restrictions that are important to note before making the purchase. Every time you need something fixed, you’ll first have to pay a deductible. Also, not all repairs are created equal – warranties may not cover specialty appliances such as high-efficiency washers and dryers – so you may end up footing the bill after all.
If you move in and decide to replace most of the appliances out of personal preference, your new appliances will come with a manufacturer’s warranty, so a warranty may be redundant.
Costs vary based on which home warranty plan you buy to which company you choose, to even where you live. For instance, if you reside in Ohio you may pay around $600 for major repairs, but if you call New York your home, the same repairs could cost upward of $1,000.
Also, you don’t just pay one fee and you’re done. As mentioned above, you’ll need to pay a home warranty deductible each time you need a repair. You’ll also have to shell out some cash for service call fees. For a general idea of what you may pay out of pocket for a home warranty, Consumer Affairs shares the below summary of average costs:
Below are some of the items commonly covered by home systems warranty and appliance warranty policies. Be sure to confirm these coverages with your home warranty company before signing a contract.
Appliances often come with a manufacturer’s warranty, which will offer to repair, service and sometimes replace that appliance for a certain amount of time. However, these warranties only cover the original purchase by the original owner, so they won’t help if you bought a previously owned home with existing appliances.
There’s also the option of getting an extended warranty, which – as the name implies – extends the life of the manufacturer’s warranty. The terms and conditions for these warranties usually resemble the original manufacturer’s warranty, but they can often be obtained from third parties such as the store in which the appliance was purchased. Extended warranties are recommended for high-end or specialty appliances, but home warranties might be better if you want bundled coverage for home items that may not require specialized repairs.
Another option is equipment breakdown coverage: It offers many of the same types of coverage that a home warranty would, though it’s usually available through your homeowners insurance – and is often less expensive than a warranty. However, equipment breakdown coverage doesn’t cover wear and tear; a home warranty will.
Hopefully you’ve got a good sense of what home warranty coverage is (and you’ve also figured out those light switches), so you can feel a little less overwhelmed — and a little more excited — about moving into your new home.
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.