A homeowners warranty or a home warranty is a service contract intended to protect a new homeowner from possible damages and appliance malfunctions after the closing. However, it only covers home appliances and systems for a certain period of time.
While a homeowners insurance pays for the loss of the home or the damages caused by fire and other natural disasters, a homeowners warranty only covers home appliances and systems for failure and malfunction caused by depreciation. However, the repairs and replacements of such systems solely depend on the coverage of the plan.
What does it cover?
The basic homeowners warranty coverage includes major appliances, such as refrigerators, HVAC systems, water heaters, stoves, dishwashers, dryers, garbage disposal systems, electrical systems, and plumbing systems.
A homeowners warranty company won’t pay for damage caused by neglect, poor maintenance, and improper installation.
How much does it cost?
Although a homeowners warranty requires premiums, it is not usually expensive. There are even sellers who include home warranty as a closing gift for buyers.
If a buyer is purchasing a newly built home, the builder will most likely offer a home builders warranty which will likely last for ten years. However, this type of warranty is usually part of the price of the new home.
Homeowners Warranty Only an Elective
A homeowners warranty is not a mandatory requirement for a mortgage and usually starts at $300 to $600 for basic and comprehensive coverage, respectively. However, most home buyers get a homeowners warranty to make sure that they will not be shedding out cash in case a defect in the house is uncovered after the closing.