Top Benefits of Getting a Home Warranty When Buying a House

Guest Post by Adam Sherman

Buying a first home is an exciting milestone in one’s life, but the significant costs involved put tremendous strain on the average person’s budget. After the down payment, moving costs, inspection fees, and other expenses, some new homeowners feel financially constrained. A broken home system or appliance is always a financial setback, but something failing within a year of a home’s sale is a new homeowner’s worst nightmare.

Fortunately, purchasing a home warranty when buying a home is an effective way to protect both one’s home and wallet. Let’s explore a first-year home warranty and its benefits.

What is a first-year home warranty?

A first-year home warranty is a service agreement that covers a home’s systems and appliances for a full year after the closing date. It ensures that items covered by the contract will be repaired or replaced should they break down due to normal wear and tear. Homeowners typically pay a monthly or annual premium and a service fee whenever they need to submit a claim, but they are protected from paying out of pocket for costly repairs.

What do home warranties cover?

Home warranties are not the same as homeowner’s insurance policies. A standard insurance policy will protect a home in the event of disaster, accident, or theft. Insurance will not cover individual systems and appliances that fail after years of general use. A home warranty can fill those gaps in coverage.

Every home warranty policy is different. Some agreements are narrow in scope, covering only a few appliances or systems in the home. Other agreements are broader and will cover virtually anything.

Here are some of the home appliances and systems that a basic first-year warranty plan will cover:

• Refrigerators
• Dishwashers
• Ovens, ranges, and cooktops
• Garbage disposals
• Exhaust fans
• Built-in microwaves
• Washers and dryers
• Electrical wiring
• Plumbing
• Heating, ventilation, and air conditioning (HVAC)

Homeowners can usually upgrade their home warranty plans to include coverage for additional appliances and systems. Common additions include septic systems, sprinkler systems, pools, wells, sump pumps, and more. Provided that the appliance or system is not already faulty, the homeowner can likely negotiate with the warranty company to receive coverage. Some warranty providers even provide home services, such as gutter cleaning, roof repair, and pest control. 

The breadth and flexibility of coverage make a home warranty a worthwhile resource for people of all means and lifestyles.

Who pays for a home warranty?

There are different categories of home warranties. In some cases, homeowners preparing to sell their home will purchase a warranty plan to entice buyers. Once the home is sold, the warranty is transferred to the new homeowners. This is typically referred to as a seller’s home warranty. Depending on the agreement between homeowners, the sellers may cover all expenses until the warranty expires, or the buyers may take over the premium and/or service fees after the closing date.

A home buyer’s warranty is another kind of plan. Homeowners purchase this type of warranty for themselves to receive coverage on systems and appliances after moving into a new home. The homeowners are usually responsible for all costs associated with a buyer’s warranty.

Sometimes, however, it’s the realtor who pays for home warranty buyer or seller plans. A realtor may purchase a plan as a gift for a client or to facilitate a home sale. 

Someone who is interested in a first-year home warranty for a new home will likely purchase a new home buyer’s warranty, but it’s important to communicate with the realtor and sellers to confirm that no one has already purchased a warranty for the home.

Benefits of buying a home warranty

For most people, a comprehensive first-year home warranty plan that is tailored to the homeowner’s needs is an invaluable asset. Here are some of the most important benefits.

• Savings — Home warranties are surprisingly affordable. Inexpensive plans go for a few hundred dollars per year. Service fees can range from around $75 to $150, but these are only required when a claim is submitted. The price tag on a new refrigerator dwarfs the annual cost of the average home warranty. If something in the home needs to be repaired or replaced, the home warranty can effectively pay for itself. A home warranty can even boost a home’s value.
• Convenience — Warranty providers maintain networks of qualified and insured technicians. When something in the home requires servicing, the warranty company can handle the logistics of sending a repair person to the home.
• Peace of mind — A faulty appliance can be a significant source of stress. It can make a home less comfortable, and the high price tag of fixing or replacing an important machine can generate a great deal of financial anxiety. A home warranty relieves homeowners of these worries.

What to look for when buying a first-year home warranty

So, is a home warranty worth it? For most people, yes. There are some things to consider as you look for a plan, however. Here are some important tips to keep in mind:

• Purchase only the coverage you need — A primary benefit of a home warranty is savings. Purchasing a plan that includes coverage for systems and appliances that you don’t own defeats that purpose. You should also confirm there are no active manufacturers’ warranties on appliances in your home.
• Find reputable companies — Unfortunately, warranty scamming is a real problem to look out for. Thoroughly research your warranty company before agreeing to a plan. Use respected sites and organizations, such as the Better Business Bureau, to find trustworthy companies.
• Ask questions — Have a list of questions at the ready as you shop around for the right plan. Make sure you understand what is and is not covered. Ask if there are limitations to how much the plan will pay out. Confirm there are no hidden costs or fees.

A first-year home warranty is an excellent investment for new homeowners. Just make sure you do your due diligence to find the optimal plan.

Adam Sherman has over a decade of experience when it comes to all things related to home service contracts.