What is a home warranty?
If you are in the process of purchasing a new home, or have just purchased one, you may have encountered offers for a home warranty – but what exactly is a home warranty? Home warranties provide discounted repair and/or replacement services for components within your home, such as your heating, air conditioning, electrical, appliances, and sometimes even pool or garage door components. Home warranties are intended for items such as a broken water heater or an appliance repair. Essentially, a home warranty can cover things that your homeowner’s insurance would not (more on what homeowner’s insurance covers below). However, homeowners should clearly read their home warranty to understand what is covered, as many warranties do not provide coverage for repairs or replacements that can be attributed to a lack of maintenance. Rather, home warranties are often meant to cover unexpected repairs.
Do I need a home warranty?
The decision on whether to have or forego a home warranty is completely optional and situational. It is not a legal nor lender requirement that a home owner have a home warranty. When contemplating whether or not you should purchase a home warranty, here are some things to take into consideration.
First, do you have an emergency fund in place sufficient to cover unexpected home repairs? Consider what would happen if you needed to purchase a new refrigerator within the first year of owning your home, or even worse, an expensive air conditioning replacement – if this is something that you could not afford as an out-of-pocket expense, then it may be worth considering whether a home warranty could assist with the cost of an expensive and unexpected repair or replacement. Home warranties on average range from $300-$1,200 per year depending on the plan and components of the house.
Second, consider how old your home’s components are and what condition they are in. If you had a home inspection done, your home inspector will likely have gauged the remaining life of some of your components, so it may be worth taking a look at your inspection report. However, even brand new home components can unexpectedly go out – consider whether any of those components come with warranties of their own.
Third, what condition is your home in? If there are components that were already not functioning when you purchased the home, a home warranty will not assist with their repair or replacement. Review different home warranty plans and their exclusions to understand what would and would not be covered. For example, many home warranty plans contain exclusions for improper installation, mold, code violations, and structural home components (such as foundation cracks, roof repairs, etc.). If many of the repairs you need would not be covered, then you may able to work with the seller to negotiate the repairs or a credit to do the repairs yourself, assuming you have not already closed on the home.
How is a Home Warranty Different From Homeowner’s Insurance?
Home warranties are intended to cover the components of your home, such as plumbing, HVAC, and electrical. Homeowners insurance, on the other hand, covers damage to the actual structure of the home itself due to events outside the control of the owner, in most cases, such as a damaged roof due to a tree falling, fire or damage resulting from a natural disaster. If you have lending on your home, your lender will require you to have homeowner’s insurance, whereas the lender will not require you to have a home warranty. As always, it is best practice to thoroughly read any homeowners insurance policy or home warranty plan to understand what is and is not covered.
Schedule a consultation with Wynn at Law, LLC today to discuss the home buying process
Also see our related blog post, Five Things I Wish I Knew as a First Time Home Buyer. Contact Wynn at Law, LLC today for a consultation at 262-725-0175 or visit our website’s contact page. Wynn at Law, LLC is based in Southern Wisconsin and has offices conveniently located in Salem, Delavan, and Lake Geneva, Wisconsin.
