Home Warranty

A quick primer on how a home warranty works

You work hard for your money. So when you invest in a product, you want to be sure it’s going to work. Everything from hairdryers to flat screens usually come with a warranty to protect you from getting stuck with a defective item and having to pay to fix or replace it.

Likewise, when you buy a house, a home warranty can protect you against expensive, unforeseen home repairs that would otherwise force you to blow your emergency fund. A home warranty also makes sense for homeowners who don’t feel comfortable with DIY repairs or who have expensive taste in appliances.

Home warranty vs. homeowners insurance

Since a home warranty provides discounted repair and replacement services on a home’s major components, many buyers think they can skimp on homeowners insurance. Unfortunately, this isn’t the case. A home warranty is not the same thing as homeowners insurance, and you need both to be fully covered in case something goes wrong.

Homeowners insurance covers major disasters like a fire, tornado, property crimes, and certain types of water damage. A home warranty, on the other hand, covers the items that keep your home running: the furnace, air conditioning, plumbing, and electrical system. Some home warranties also cover major appliances, such as your washer and dryer, refrigerator, and swimming pool.

How does a home warranty work?

Say you move into your new house and your furnace goes kaput after just a few months. You would call your home warranty company and they would send an approved service provider to take a look at the problem. If the provider determines that the furnace had been properly maintained and is indeed covered by the warranty, the work will be completed. The only cost to you as the homeowner is a small service fee (around $60) on top of the money you already spent to buy the home warranty.

The drawbacks

While a home warranty is designed to protect you from draining your savings account, simply having one doesn’t mean you’ll never have to spend money on home repairs. Some problems won’t be covered by your home warranty. If you have a claim denied, you’ll still have to pay the service fee to the home warranty company and you’ll ultimately be responsible for repair costs.

The bottom line

A home warranty can be a great buffer for those who want to protect their emergency funds. A $60 fee for a $500 problem will certainly give you a sense of relief. But, before signing on the dotted line, it’s important read the fine print in your contract and ask questions so you understand what’s covered – and what’s not.

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Kate Kasbee
Kate Kasbee is a blogger and freelance copywriter living in Los Angeles. She has a background in real estate marketing and has also written about a variety of subjects including pet care, how to adopt a vegan diet, and technology. Prior to living in sunny California, Kate spent eight years in Chicago where she lived in nine different apartments in five different neighborhoods. Though she’s not quite done exploring, Kate dreams of planting her roots and owning a home with creaky floors and plenty of land for starting an organic farm.
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