The home buying process can be complicated and rife with things to remember. Some things can get lost in the shuffle, but it’s crucial you keep an eye on what’s important. When it comes to the question: do I need a home warranty? The short answer is YES—especially if you’re a first time home buyer with no experience maintaining a home.

home warranty

What is a Home Warranty?

A home warranty is a contractual agreement between the owner of the home and entities like risk management groups, home builders, etc. Founded in 1971 by American Home Shield, the home warranty industry provides home service contracts that cover the replacement and/or repair costs of major systems such as heating, cooling, electrical and plumbing, home appliances, and other parts of the house. Coverage can vary significantly from state-to-state and policy-to-policy, and contracts don’t cover all home repairs. Make sure you ask to see a sample copy of a policy before committing.

In general, the home warranty covers repairs and replacements for one year and costs anywhere from $175 to $400 plus a deductible, depending on the age and size of the home, as well as the amount of coverage you choose.

Who Pays for It?

During a home buying/selling transaction, the buyer usually pays for the home warranty policy. However, the seller may choose to pay for it as a way to avoid liability if problems occur after closing. On the other hand, your Realtor may decide to pay for it as a closing gift.

If you’re the one paying for the home warranty, ask your real estate agent for recommendations. Some of your options include the aforementioned American Home Shield, which, according to the website, “accept[s] and pay[s] more claims than any other home warranty company in the nation,” Fidelity National which offers “guaranteed service work—without an additional service fee,” Old Republic Home Protection, which offers optional coverage for pools and spa equipment, and First American Home Buyers Protection Corporation, which boasts a 24/7 service department.

Closing Thoughts

Make sure to ask your provider specifically what is covered. See whether the company will pay for repairs to ensure appliances and/or systems are compliant with new regulations. Sometimes your service provider will deny a claim; if this happens, call your representative to see if an alternative can be worked out.

Lastly, avoid code violations, improper installation, unusual wear and tear, and improper maintenance, as these can lead to denial of payment.

Overall, remember that it’s important to cover your bases. Your home will most likely be the biggest investment you’ll ever make, so why not protect that investment?


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