Home Buyer's Guide to Home Warranties

One of the nice perks of buying a new home is the home warranty. Having a home warranty policy can give homeowners assurance that if something in the home breaks down, the warranty may pay to repair or replace it. For new home owners, who are often strapped for cash, the home warranty can be a serious advantage at a crucial time. This guide will tell new homeowners everything they need to know about the home warranty.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.

What Is A Home Warranty?

A home warranty is similar to an insurance policy. In most cases, when an appliance or a covered system breaks down, the home warranty company will send a contractor to the house to make the repair. Usually home warranty policies require the homeowner to make a co-payment or pay a deductible before services will be rendered. If repairs cannot be made, the home warranty company may either pay to replace the item or send the homeowner money to replace the item.

Do All Home Purchases Come With A Home Warranty?

Home warranties are sometimes included in the home buying contract as a bonus for home buyers, to sweeten the offer and make the contract more attractive. The home warranty is usually paid for by the home sellers when escrow closes. In some cases, if allowed by state law, your real estate agent may also pay for a home warranty. However, not all home purchases come with a home warranty.

Home warranties for preowned homes are usually valid for one year after the new homeowner takes possession of the house. Once the home warranty runs out, the homeowner may have the option of paying the premium to extend the home warranty for another year.

New construction homes often come with home warranties that cover the construction of the home. Different construction companies offer different levels of warranties and length of times of coverages. Be sure and ask your new home builder for information regarding any new construction home warranties.

What Does a Home Warranty Protect?

Home warranties vary in the systems that they protect. Typically a home warranty will protect kitchen appliances, the water heater, the home's heating and cooling systems, plumbing and electrical systems. Often home warranties also have "add on" services that homeowners can pay an additional amount to cover on their policy. Examples of add on systems include the washer and dryer, refrigerators and a pool pump.

What Does A Home Warranty Not Protect?

The home warranty does not usually cover anything structural, such as the roof, walls, foundation or floors. Home warranties also do not cover the sewer, chimney or septic tank. Some home warranty companies may offer some of these protections as an add on. Homeowners who are interested in getting these protections may pay for it themselves after purchasing the home.

Often, however, new construction home companies offer warrantied that may cover parts of the building, including the foundation, roof and other building parts. be sure and have a clear understanding from the new home builder what parts of the newly constructed home are covered and what items are not.

What's the Difference Between a Home Warranty and Homeowner's Insurance?

Homeowner's insurance is a protection that is usually required by mortgage lenders, however, home warranties are not. Homeowner's insurance protects the structure of the home from covered disasters like fire, lightning, wind and hail. The home warranty does not cover damage from specific disasters, but instead covers specific systems.

Homeowner's insurance may help to pay to replace the home in the event that it is destroyed by a covered event, whereas the home warranty will only replace certain parts of the home. Finally, homeowners insurance offers additional protections that home warranties do not, like liability insurance. This type of insurance may protect the homeowner from financial liability in the event that the homeowner is sued.

How Can You Find Out More About Home Warranties?

If you're a Tierra Verde FL home buyer and you would like to know more about the home warranty for the property you are in the process of buying, contact the home warranty company or your real estate agent. Your home warranty company can answer any questions about the particular policy that will come with the home you are buying.

For informational purposes only. Always consult with a financial advisor before proceeding with any real estate transaction.