Home warranties are often confused with homeowner insurance. Here is a quick difference:

Home insurance covers losses due to fire, theft, weather, etc. (Read about insurance inspections here)

Home warranties cover repair or replacement of covered items like kitchen appliances or HVAC systems.

What is a Home Warranty?

A home warranty is a service contract typically purchased by a new homeowner to cover items that might fail after moving in. They are particularly handy for older homes or where failure of major appliances is a concern.

Warranties don’t cover other interior items like windows, doors, flooring, etc.

They may cover electrical, plumbing, heating, cooling and kitchen appliances that were in working condition when you purchased the home and have since failed.

Are Home Warranties Worth It?

They certainly can be.

Repairs or replacements to AC units, furnaces, and water heaters can be in the thousands. Sometimes up to $5,000. If you had a home warranty, this could have been covered for a small service fee (~$100) and your annual cost of the warranty itself ($350-$600/yr).

Take a look at reputable home warranty companies and see if you feel like the cost is worth the reduction in risk should something fail after you move in.

When to Consider a Warranty

If your home inspection reveals working, but older appliances & systems you could be a good candidate for a home warranty. Sometimes the seller of the home will include this during negotiations instead of fixing issues or giving a lower price.

If you’re not exactly the DIY type and you’d rather have a contact to call if something fails, you might also consider the peace of mind warranties bring.

Bottom Line

If you’re considering a home warranty just make sure you read the fine print. You want to make sure you fully understand what you’re paying for and what exactly is covered. Keep in mind that many costs associated with homeownership, you have to pay for one way or another.

It’s just a matter of if you want to hedge your bets and pay for some of it upfront or save your dollars for when the inevitable home appliance fails on you!