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Making Sense of a Home Warranty

As a consumer, when you purchase an expensive item, like a car or refrigerator, you expect to receive a warranty that the manufacturer will repair or replace that product if it breaks down. A warranty makes sense for big-ticket purchases, but what about for a home?


An Overview of Home Warranties

A home warranty typically covers the repairs on specific items in a home, such as heating and air conditioning systems, plumbing, and built-in appliances. (1)

A home warranty on a newly built home may be offered by the homebuilder and may cover up to 10 years on structural defects: one year on items like walls and paint, and two years, for HVAC, plumbing, and electrical systems. Appliances may only be covered for six months. Typically, the cost of this policy is contained in the price of the home.


A home warranty on an existing home also can be purchased, usually paid for by the seller or real estate agent to facilitate the sale of a house. These policies tend to have coverage not lasting more than one year. Occasionally, a home buyer may choose to purchase a policy, for instance, in the case of buying a foreclosure.


Keep in mind that several factors will affect the cost of a home warranty policy, including the size, location, and contents in the home. Any guarantees associated with a home warranty policy are dependent on the ability of the issuing company to continue making claim payments.


Be Realistic

You should understand the limits to which a home warranty will protect you. A home warranty promises you that certain items will remain functional; it does not promise you a new appliance or furnace. However, a home warranty may be most beneficial to individuals who will be purchasing an older home.


Though it may be comforting to know repairs are covered, a warranty may restrict the contractors you can use to do the repair work depending on the restrictions provided within the warranty policy.