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Understand Your Home Warranty

By Elizabeth R. Elstien

Your home will likely be the biggest investment you will ever make. Repairs or replacement of costly appliances or heating systems can be difficult to afford. Yet, no homeowner want to be without a refrigerator, range or heat. Learn how to purchase home warranty insurance, how it works and why it's needed.

Who benefits from a home warranty?

Home warranties are for resale homes rather than new home construction. A new home is already covered either by the builder or by the warranty on the new appliances. Given the fact that most resale homeowners have two mechanical failures a year, homeowners of older homes especially benefit from this coverage with their aging appliances and other systems.

Do I need a home warranty if I have homeowner's insurance?

No, a home warranty is not mandatory. It is, however, different than homeowner's insurance, which provides more structural protection and is a requirement if the home was purchased with a mortgage loan. A home warranty provides added coverage and for home appliances and mechanical systems along with the pool/spa, if applicable.

When do I purchase a home warranty, and when is it effective?

If not offered in the listing and paid by the seller, a home warranty is purchased by the buyer at closing and is good for one year, but information must be completed and received prior to closing by both the warranty company of choice and the escrow company. As the buyer, you also have 15-30 days after closing to purchase the warranty.

Who offers a home warranty?

Many companies offer home warranties in Texas, such as Choice Home Warranty or Complete Appliance Protection, depending on the location. Often brochures can be found in your real estate agent's office detailing specifics of each plan. Research can also be done online. Remember to ask friends and relatives about the home warranty company they use, too. Unfortunately, not all companies provide the same degree of customer service or satisfaction.

What are the home warranty fees and coverage?

Typically, the homeowner pays a fee to have coverage for one year with an option to renew. The yearly fee varies depending on the type of coverage you desire. The standard coverage fee (premium) averages $350 and covers most major appliances. Insurance for pool and electrical systems or air conditioning and other nonstandard items are at an additional cost. Compare premium and deductible costs and terms between warranty companies in your area.

The home warranty insurance does not cover routine maintenance, such as starting up a gas furnace for the winter. However, if an item covered by your home warranty insurance is found not to work, just call in a claim to the warranty company. For a minimal service fee depending on policy, the home warranty company will dispatch a contractor to check your appliances or system and either repair or replace it. While you have no say in the contractor used, the savings can be tremendous.

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About The Author

Elizabeth R. Elstien has worked in real estate for over 15 years as a real estate...

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