What Is A Home Warranty & How Is It Different To Home Owner's Insurance?

What Is A Home Warranty?

I like to say that a home warranty picks up where a home insurance policy stops. Home insurance covers large events that are usually accidents or could not have been prevented by general maintenance. Insurance should cover something like your air conditioning unit breaking because it was struck by lightning, but it wouldn't necessarily pay to repair your air conditioning motor because it was old and died from overuse. A home warranty is designed to give a home owner the peace of mind that if something breaks and their home insurance policy won't cover it, they still have a way to get most of the repair cost covered instead of paying for it entirely out-of-pocket. 

How Much Does A Home Warranty Cost?

The cost of a home warranty depends on the property, the company you purchase from, and what is included in the warranty, but it is typically around a $500 to $700 annual expense. In addition to the annual premium for the home warranty, there is also a deductible. On average, the per incident deductible is around $100, but there are situations in which it can be a little bit less (or more) depending on what kind of plan you choose.

How Does A Home Warranty Work?

Let's use an example. Say you discover your refrigerator is no longer cooling properly (or at all). If you call an appliance repair company, it may cost you $500. If you call your home warranty company, you only pay the per incident deductible. They will either send out a technician of their own to fix it, or give you permission to find someone by yourself (who is licensed and insured, per the warranty's terms of use). Assuming there is only one issue that the refrigerator needs to have fixed, you would  only pay one deductible (that's the part that's an average of $100), even if the repair costs are substantially more. However, it is important to read the fine print of your warranty, as some companies will say that if there are multiple parts broken that need to be repaired in order to fix your appliance, they will count each one of those as a separate incident with their own deductible. However, even if that happens it can still be substantially cheaper to have the warranty cover it than paying for all the repairs in full.

What Kind Of Things Does A Home Warranty Cover?

You can get a home warranty that covers all different kinds of things. Many companies offer tiered packages, with more being covered the more you pay. Typically, things like appliances and major systems (HVAC, roof, hot water heater, electric, plumbing, etc) are covered. Some home warranty companies will also offer coverage for in-ground pools and spas, septic systems, water wells, and even guest suites. Clicking this link will open a PDF of an example contract offered by one of the national home warranty companies, American Home Shield. This is provided as an example of how coverage can work and is not intended to be representative of all home warranty companies. It is also not guaranteed to be the same terms that your warranty will include if you purchase an American Home Shield policy.

Important Note For Home Buyers Before Going Under Contract

At the time you go under contract to purchase a home, you need to make several decisions about how you're going to structure your offer. Things like price, closing date, whether you're asking for the sellers pay some of your closing costs, and several other things are part of the offer structure. One of the things you have to decide is whether or not you would like the seller to pay for your home warranty. A buyer always has the opportunity to purchase a home warranty on their own if the seller won't pay for it, but in certain situations the buyer may want to ask the seller to cover the cost of the home warranty.

If a buyer asks the seller to cover the cost of a home warranty, that comes out of the seller's bottom line. Typically, my suggestion is that a buyer who is asking for the seller to pay their closing costs doesn't also request a home warranty, however, it is ultimately up to the buyer to decide if they would like to ask for it, and we can discuss the best course of action based on your specific situation when the time comes. Keep in mind - if a buyer wants the seller to pay for the home warranty, they need to know which company they want to purchase the home warranty from and how much it will cost prior to submitting an offer. If the buyer decides to purchase it themselves, the company and specific policy can be decided on after the contract is executed.

If you have further questions about home warranties, please contact me directly and I'd be happy to help!

Philippa Main

813.501.5498

PM@YourMainAgent.com

Future Home Realty

13029 W. Linebaugh Ave #101 Tampa, FL 33626

  • Facebook Social Icon
  • LinkedIn Social Icon
  • Twitter Social Icon
  • Google+ Social Icon

Both myself and my brokerage, Future Home Realty, are committed to providing a website that is accessible to the widest possible audience in accordance with ADA standards and guidelines. We are committed to accessibility and usability of our website to everyone. If you are using a screen reader or other auxiliary aid and are having problems using this website, please contact us at 813-501-5498 or pm@yourmainagent.com and we will be happy to assist you.