A home warranty is not the same thing as homeowner's insurance, nor is it a replacement for homeowner's insurance. Homeowner's insurance covers major perils and catastrophes, such as fires, hail, property crimes, and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. On the other hand, a home warranty is a separate contract covering repairs and replacements on systems in your home, usually for renewable periods of one year at a time.
What does a home warranty usually cover?
While home warranty policies and coverage may seem similar, each company's policy offerings are unique. In general, a home warranty will cover your home "from the studs in": your home’s systems, such as electrical and plumbing, and your appliances. You may also be able to choose coverage for your pool or hot tub, your septic system, or additional specialty appliances. A home warranty usually does NOT cover exterior issues such as the roof, water intrusion/leaks due to a roof issue, fencing, decking, landscaping, anything in a detached garage or structure, etc.
The cost and coverage of a home warranty can vary widely, so always compare policies before purchasing. If you are interested in a home warranty -- whether the seller is purchasing and providing for you at closing or if you are purchasing it for yourself -- we send you a number of brochures for the major home warranty companies and ask that you review their offerings, their coverage and pricing, and choose the one that is right for you and your new home. In general, warranties usually range between $325 – $700 and are good for one year from the purchase date (and in most cases are renewable each year for as long as you'd like to keep it in place).
It's important to note that, while home warranties cover many of your new home’s crucial systems and appliances, those items must be in working order before the contract is entered into with the warranty company. When you buy a home warranty, consider premium and optional coverage to customize the plan to fit your needs, especially if your home has more than one oven, an icemaker, a stand-alone freezer, a wine fridge, etc. These extra appliances may not be covered under the standard warranty.
Who pays for the home warranty?
That depends. In many cases, a buyer will ask a seller to provide a home warranty as part of the home purchase, and it is typical, if the seller agrees, for the warranty to be provided to the buyer at closing and be good for one year from the date of closing (and is renewable by the seller for a year at a time after that). If the seller doesn't agree to provide a home warranty, any buyer or homeowner can purchase a home warranty for themselves at any time.
In some cases, the seller may already have a home warranty on their home, either one that they have kept active on the home since the time that they purchased it or one that they put in place as Seller Coverage during their listing period -- in both of these cases, the warranty is usually transferrable to the buyer at closing (and will usually be good for one year from the date of closing).