Imagine the following scenario: You’ve just moved into your new home. When you come home from work one evening, none of the lights or appliances are working. You immediately check the fuse box and breaker switch — but nothing seems to be wrong there. A quick check on your smart phone shows that there are no power outages in your area. So there’s really only one conclusion: Your home’s electrical system has failed.
Of course, this is the last thing you want to experience, especially in a new home. Unfortunately, however, things like this happen all too often. That’s why it’s advisable to purchase a home warranty.
What Is a Home Warranty, and What Does It Cover?
A home warranty is a contract that protects you from expenses that arise from repairs that a homeowners insurance policy doesn’t cover. It provides coverage for the heating, cooling, plumbing and electrical systems, as well as for major appliances such as your oven, washer, dryer and refrigerator — so long as the failure is caused by normal wear and tear. Some home warranties also extend to minor appliances such as garbage disposals and water softeners, or to features such as swimming pools and Jacuzzis. However, a home warranty doesn’t cover the structure of the home.
The price of a home warranty depends on the home and the type of appliances you have. In general, basic coverage costs approximately $300 per year and can amount to as much as $600 per year, according to Realtor.com. On top of this premium, you’ll have to pay separate service fees — usually anywhere from $35 to $50 per incident. Yet when compared to the price of costly repairs, a home warranty is often a protection that’s well worth the investment.
Note that when something fails in your new home, it doesn’t automatically fall under the home warranty protection. For example, if your dishwasher breaks down and floods your kitchen, the warranty might cover the costs of repairing the appliance, but you might have to file a claim with your homeowners insurance company to recover the costs of the ensuing water damage.
In addition, according to Consumer Reports, you need to read the fine print on a home warranty to make sure you understand what it does and doesn’t cover. For example, some warranties cover the mechanism of a water heater, but not the tank.
Does the Age of the Home Matter?
Home warranties aren’t just for new construction. As the California Department of Insurance (CDI) advises, you can get a home warranty on a home of any age, so long as all covered systems and appliances are in good working order when the contract is first signed.
Where Can I Purchase a Home Warranty?
If you’re purchasing a newly built home, the builder might offer a home warranty. In other cases, you can obtain a home warranty from an independent home warranty company. It’s important to keep in mind that home warranty companies are regulated and licensed by the CDI. That means that you have any concerns about a specific company, you can check with the CDI to make sure they’re properly licensed.
Purchasing a Home Warranty Is Recommended — Not Required
Purchasing a home warranty isn’t required. However, it can help protect you from unpleasant financial surprises during your first year in your new home — and even longer if you choose to extend your coverage.