Real estate is one of the largest investments a person will make, and protecting that investment is really important. While homeowners insurance is the most common form of protection, a home warranty is a great addition - it provides coverage for the home’s systems and appliances due to normal wear and tear.
What is a Home Warranty?
Home warranties are designed to cover mechanical failures of home systems and appliances. Depending on the plan, coverage may include HVAC systems, water heaters, sprinkler systems, refrigerators, jetted bathtubs, fireplaces, and more. Keeping up with maintenance is crucial, as plans typically will not cover preexisting conditions or issues that could have been prevented with proper maintenance.
Home Insurance
Separate from a home warranty, home insurance is highly encouraged and is required by mortgage lenders. Home insurance covers the structure and your belongings due to unexpected incidents such as fire, theft, liability, or other unforeseen damage. Flood insurance is generally not included in a standard policy, but can be a very beneficial add-on where appropriate.
Home Warranty Plans
There are multiple companies offering a variety of home warranty plans. These plans are tiered, allowing homeowners to choose their desired coverage based on wants, needs, budget, and the systems in their homes. When researching which plan is best for you, it’s important to determine if square footage is a factor, and whether a la carte coverage is available. Home warranty premiums may be paid either monthly or annually, and when a claim is made, there is usually a nominal service fee, similar to a deductible.
Builder’s Home Warranties
With new construction, builders may offer their own warranties, which can cover items such as defects in workmanship and materials, mechanical systems (including HVAC, plumbing, and electrical), and structural components, typically for the first year after construction is completed. While these warranties are different from those purchased through a home warranty company, they provide assurance that the builder stands behind their work and will address most issues. The warranty terms are typically written into the Contract to Buy and Sell and will transfer with ownership if the property is sold during the warranty period.
Although they serve different purposes, pairing a home warranty with your homeowners insurance will help protect your investment against system breakdowns and unexpected events. For more homeownership information, check out our real estate blogs here and please don’t hesitate to contact us.
