Is a Home Warranty Worth Buying?

When you buy a home, you’ll be pulling your wallet out quite often. There are a number of expenses you’ll incur, above and beyond your down payment and earnest money deposit. Among them are a home inspection, wind mitigation inspection, pest inspection, appraisal (which can be rolled into closing costs), and, the closing costs (which can also be rolled into your mortgage). Then, there’s the cost of moving, purchasing new items for your home and the option to buy a home warranty.

If you’re buying new construction, like at home in The Pointe at Hunter’s Creek, you’ll likely get a warranty thrown-in with the purchase. The reason new construction developers offer free home warranties is primarily twofold: these are great marketing, and, the future can’t be predicted. New appliances aren’t immune from problems and you’re homeowner’s insurance certainly won’t cover the central air conditioning unit that suddenly breaks down, which makes a home warranty worthwhile.

What a Home Warranty Covers

In general, home warranties are sold with differing coverage. Some cover systems, such as plumbing, electrical, water heaters, smoke detectors, ceiling fans, and garbage disposals; others however, cover appliances, such as clothes washers and dryers, dishwashers, refrigerators, garage door openers, and ranges.

“Your homeowners’ insurance covers the house itself and your personal possessions in case of a fire, theft or damage from another cause, but you won’t be able to make a claim if your heat pump fails or your washer and dryer break down.” —

The age of the home doesn’t matter, so if you buy new construction, that isn’t a factor in obtaining a warranty or filing a claim. However, the condition of the items covered is another matter. Home warranties stipulate the items covered must be in good, working condition prior to the assigning of their protections. For a few hundred dollars, a homeowner can avoid the cost of replacing a major system or appliance.

Home Warranty Worth: What to Know

Of course, as with any type of warranty coverage, there are drawbacks to home warranties, but there are also benefits. The latter is one reason why home builders generally include a warranty with the sale of their homes, it’s peace of mind and good business practices. Here are a few things you ought to know about a home warranty:

  • New construction warranties. In general, a newly built home that’s sold comes with a home warranty which covers the structural components of the residence for up to 10 years. In addition, there are items which are typically covered for a year, such as drywall, stucco, and paint. A two year warranty usually applies to HVAC systems, electrical systems, and plumbing.
  • Resale home warranties. Resale homes can come with a home warranty purchased by the seller or the buyer. These generally provide one year of coverage for major appliances and systems. However, those items must be well-maintained by you as the policyholder.

As evidenced by the coverage and the requirements, new home warranties offer by builders usually have more worth. The cost of a home warranty for an existing home or resale, generally does not make for a good financial-based purchase, as only about 12 percent of what’s paid out is used to cover claims. So, if you just put a little money aside each month, you can self-insure for less. However, home sellers should know that buying a home warranty is worth the ROI as those properties sell 11 days faster and for an average of $2,300 more, according to the L.A. Times.