A home warranty is a service contract that covers the repair or replacement of major home systems and appliances. It is distinct from homeowners insurance, which primarily covers the structure of the home and its contents in the event of unexpected events like fire, theft, or natural disasters.

7 Key points about home warranties include:

  1. Coverage Items: Home warranties typically cover major systems such as heating, ventilation, and air conditioning (HVAC), plumbing, electrical systems, as well as major household appliances like refrigerators, ovens, dishwashers, and more. The specific items covered can vary depending on the warranty plan.
  2. Service Calls: If a covered system or appliance breaks down or malfunctions, the homeowner can contact the warranty company, which will arrange for a service provider to assess and repair or replace the item. The homeowner usually pays a service fee or deductible for each service call.
  3. Terms and Conditions: Home warranties have terms and conditions that outline what is covered, any limitations or exclusions, and the duration of coverage. It’s essential to carefully read and understand these terms to know what to expect from the warranty.
  4. Costs: Home warranties typically involve an annual premium, which can vary based on the level of coverage and the provider. In addition to the annual premium, homeowners may have to pay a service fee or deductible each time they request service.
  5. Not a Substitute for Homeowners Insurance: It’s important to note that a home warranty is not a substitute for homeowners insurance. Homeowners insurance covers events like fires, storms, and theft, while a home warranty focuses on the repair or replacement of covered systems and appliances due to normal wear and tear.
  6. Renewable: Home warranties are often renewable, allowing homeowners to continue coverage beyond the initial contract period.
  7. Real Estate Transactions: Home warranties are sometimes offered or negotiated as part of a real estate transaction. Sellers may provide a home warranty to give buyers peace of mind about the condition of the home’s major systems and appliances.

While home warranties can be beneficial in providing budget protection for unexpected repairs, it’s essential for homeowners to understand the terms of the warranty, including what is and isn’t covered, as well as any limitations or exclusions. As with any service contract, researching and choosing a reputable home warranty provider is crucial.