What is a Home Warranty?

Josie Myers
Josie Myers
A home warranty may cover large appliances, like refrigerators.
A home warranty may cover large appliances, like refrigerators.

A home warranty is a contract offered to homeowners to protect them in case of major systems failures in the home. Most home appliances and major home systems are covered. The warranty provider replaces anything that breaks or ceases to function during the time period covered by the warranty. The systems and appliances typically covered by a home warranty include: the plumbing system, electrical system, heating system, air conditioning, dishwasher, garbage disposal, cooktop, oven, duct work, washer, dryer, refrigerator, pool or spa and water heater.

A home warranty is most often purchased in conjunction with a home purchase. Sometimes it is an extra enticement offered by the seller. Other times, a new homeowner will purchase a warranty to protect themselves from potential problems that may have been missed during a home inspection.

The age of the systems does not affect the coverage. Service is usually offered 24 hours a day, seven days a week by approved contractors. Most warranty services require a small payment for a service call, but otherwise a warranty is significantly cheaper than a major systems failure. Plans are generally unlimited in use, so potentially a warranty could replace every appliance in the home if they all broke within the time limits of the contract.

In many cases, home buyers are placing hundreds of thousands of dollars into the purchase of a home. After putting years of savings into a purchase, a warranty gives assurance that there most likely won't be any other major out of pocket unplanned expenses. Since contractors are pre-screened by the warranty service, customers don't have to worry about disreputable people entering their new home in case of an issue.

Sellers offer warranties as a bonus for home buyers to increase the competitiveness of their home in the market. Sellers hope that if a buyer is torn between two homes, a warranty can help to push the covered home ahead. A buyer will have more confidence going into the sale, and therefore more willing to work with a seller. A home warranty also decreases seller liability, since the warranty company will take responsibility for items regardless of condition. Many plans cover the home during the time it is on the market, which means sellers don't have to worry about putting thousands of dollars into an unexpected repair on a home they will no longer use.

There are many conditions that must be met for a warranty to cover a service and many homeowners sign a contract without reading all of these lines of conditions. Some contracts will not cover systems that have preexisting conditions, problems that are the result of improper installation or those that violate building codes. For example, if a dryer is not vented outside and that is a violation of local code, the dryer must be vented before it is covered by the home warranty.

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Discussion Comments


It's also important to understand the difference between a home warranty as it applies to newly built homes and a home warranty for existing properties, which is often called a residential service contract or home service contract.

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    • A home warranty may cover large appliances, like refrigerators.
      By: Piotr Pawinski
      A home warranty may cover large appliances, like refrigerators.