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Homeowner’s insurance is essential for mortgage approval, but homeowners can also benefit from a comprehensive home warranty. Find out if one is right for you by comparing costs and reviewing sample contracts.

A home warranty is different from homeowner’s insurance and works well alongside it. Learn the key differences in this article.

Coverage

While home insurance covers damage caused by fire, theft or natural disasters, a home warranty protects homeowners against the financial burden of having to repair and replace appliances and systems that break down from normal wear and tear. While the specific items covered by each plan vary by provider, most include coverage for appliances such as a washer/dryer and refrigerator and also cover major systems like electrical, plumbing, heating and air conditioning.

When choosing a home warranty provider, consider their pricing and plans and whether they have unique add-ons that you might be interested in. You should also check the provider’s reputation and customer service, as well as their nationwide network of technicians.

For new construction homes, a builder’s warranty will be included in the purchase price and is paid for by the home builder. Alternatively, a homeowner’s warranty can be purchased at any time to provide protection against system and appliance breakdowns due to normal wear and tear.

Exclusions

Home warranty coverage is a topic that comes up often in real estate transactions. For example, some sellers will offer to purchase a home warranty for the buyer as a way to provide reassurance that certain systems and appliances in the house will be fixed or replaced if they fail due to normal wear and tear or some other issue.

These warranties typically cover systems like plumbing, air conditioning and heating, as well as appliances such as washers/dryers, refrigerators and pools. They do not, however, cover the structure of the house or personal possessions, which is why homeowners insurance is essential for everyone to have.

As with any insurance product, home warranties come with limitations and exclusions that should be reviewed carefully. For example, most providers will limit the amount of money they will reimburse for a single repair or replacement up to a certain annual or lifetime maximum. I discussed these in a couple of law review articles two or three years ago, so check out the articles to get a better understanding of what to look for when researching home warranty coverage.

Repairs

Home warranties provide reassurance for home buyers who have limited information about how well the homes they are purchasing were maintained or, in new construction, how well components are built. They also help those who may be cash strapped and don't want to deplete their emergency savings to make costly repairs.

However, home warranties don't protect against everything that can break in a home. According to the National Home Service Contract Association, contracts typically don't cover preexisting conditions or issues caused by inadequate maintenance or modifications.

Choosing the right plan and provider is key to getting the most out of your home warranty. Consider coverage, pricing, reputation, contractor network and customer service before making a decision. Ensure your policy includes no monetary limits on specific systems and appliances and that it covers structural problems such as foundations, roof structures, beams & girders and load-bearing walls. It should also provide 10-year protection on warranted structural elements. Many providers offer additional add-ons that allow homeowners to customize their plans.

Replacements

A home warranty provides for the repair or replacement of certain systems and appliances if they break down because of normal wear and tear. Most plans charge a service fee for each visit from a technician to your home, and you may be required to pay a contractor's deductible if the cost of repairs or replacement exceeds a plan's coverage limits.

Those considering a home warranty should choose a provider with a good reputation and affordable pricing. Look for a company with a contractor network that serves your area, and consider unique add-ons that might be beneficial to you, such as roof leak protection or plumbing stoppage coverage.

A home warranty is a good choice for homeowners who don't want to deplete their emergency savings account for unexpected repair bills, as well as for those who aren't handy or don't have the time to screen and hire contractors. However, it is important to understand your home warranty's limitations and keep up with routine maintenance to avoid paying for costly repairs or replacements. For additional information, you can find a lot more information on specifics such as at https://www.cinchhomeservices.com/faq-library/-/faq/does-a-home-warranty-cover-electrical-issues where home warranties are available.