If you’ve heard the term “home warranty” during the home buying process, you may be wondering. Do I need a home warranty when I buy a home? The short answer is no. Home warranty is optional, but you can feel at ease by covering electrical appliances and major system repairs due to normal wear and tear. It’s a prepayment, but in the long run you’ll save money.
Quick answer: No, no home warranty is required, but it helps to cover electrical and system repair costs due to normal wear and tear. It’s a plan of options that some home buyers choose for peace of mind
Whether you’re buying a home in Tampa, Boise, ID, or Providence, RI, FL, this Redfin guide will help you explain when a home warranty is worth it and help you determine if it’s a choice that suits your needs.
Home warranty, sometimes known as a home protection plan, is a service agreement that covers the main components of your home. If they stop working, the warranty will help cover the costs of modifying or replacing them. Unlike homeowner insurance, which deals with sudden damage from accidents or natural disasters, home protection plans focus on wear issues that occur over time.
It also helps you save money by reducing the out-of-pocket costs you face due to unexpected repairs. For example, if your furnace breaks down mid-winter, the home warranty can cover most costs and make it work again, making it easier to deal with surprise issues without blowing your budget.
>>Read: Home Warranty vs Home Inspection: Do you really need both?
Do I need a home warranty?
No, you don’t need a legal guarantee when purchasing a home. Unlike homeowner insurance, which lenders usually require to protect the structure itself, home guarantees are optional service contracts. Provides coverage for repair or replacement of major home systems and appliances that have failed due to normal wear and tear.
Although not required, some sellers may include home warranty as an incentive to make the list more attractive. Buyers can also buy one for mental security, especially if their home has old systems or appliances. Whether you decide to get a home warranty will ultimately depend on your budget, the age and condition of the property, and the comfort of unexpected repair costs.
It is not covered by the home warranty
There is a clear distinction between what the home warranty covers and what it does not. Understanding these details is important when considering whether the warranty makes sense for your home.
What is normally covered
HVAC System: Central Heating Unit, Air Conditioner, and Ductwork Piping System: Pipes, Toilets, Water Heaters, and Interior Piping Lines Electrical System: Main Electrical Appliances for Wiring, Electrical Panels, Related Components: Refrigerators, Ovens, Built-in Microwaves, Dishwasher, Garbage Treatment, Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Roof Septic System or Well Pump: Selective Plans may also include repairs to septic tanks or well pumps.
Commonly excluded
Existing Conditions: Issues that existed before coverage began are not covered. Improper installation or maintenance: If an item fails due to incorrect installation or maintenance, the warranty usually does not apply. Cosmetics Problems: No dents, scratches or other superficial damage. Items under manufacturer’s warranty: If the appliance is still covered by the original manufacturer, the home warranty will not replicate its protection. Non-discussed furniture: Small appliances such as countertop microwaves, standalone freezers, and wine coolers are often excluded from standard plans
Pros and cons of home warranty
While home guarantees can be a useful safety net, they also come with important trade-offs to consider.
Strong Points:
Predictive protection against unexpected repairs. It usually costs several hundred dollars a year compared to potentially expensive out-of-pocket repairs. One call to coordinate services, simplify the process and save time for trustworthy contractors. It helps to avoid the cost of mental peace, knowing that something is covered in case something breaks, and the great surprise. Transferable compensation: If you sell your home, you can transfer many home warranty to new owners, which could make your property more attractive to the buyer.
Cons:
A required service fee (usually between $50 and $125) is required for each claim. This can be added if multiple repairs are required. Coverage limits and exclusions may result in some repairs being discovered. This means you may face unexpected costs. Potentially extended out-of-pocket costs in filing a claim that may require persistence to be resolved.
If the home warranty is worth it
If you are buying an older home, the warranty makes it easier to repair or replace your aging system and appliances, and can fail faster than later.
For example, replacing a furnace can cost around $3,800 to $10,000, but annual warranty coverage typically costs between $300 and $600 with a service charge. Having that safety net saves thousands of people if something unexpectedly breaks.
You may consider a home warranty if:
You are the first homeowner who wants predictable costs instead of a massive surprise bill. Rather than worrying about the full cost of a large repair, you pay the set premium and service fees when something goes wrong. You are a seller who wants to make your list more attractive and gives the buyer a special confidence that the surprise after the move will be covered. You own a property for rent and want to simplify repairs while keeping costs more predictable over time.
>> Read: Home Maintenance Checklist for First-time Home Buyers
When to skip home warranty?
When you purchase a newly built home, the builder warranty often covers the main system and structural components, making the home warranty redundant. The same applies to households who have recently replaced appliances or systems under manufacturer warranty.
Also, some homeowners prefer to pay from pockets for repairs occasionally and handle the issue themselves. In that case, setting up a dedicated savings fund for maintenance could be a sensible alternative.
Please note:
Older systems with no maintenance records may be denied a claim if they cannot prove regular maintenance. Preventive home maintenance and excellent documentation can provide the same peace of mind at no extra cost.
How to know if a home warranty is right for you
Find out the age and condition of your home’s systems and appliances
Older or frequently used items are likely to require repairs and more valuable coverage. If you’re worried about something big like an HVAC system, research the typical cost of a repair or replacement and compare it with one year warranty coverage and service charges.
Think about your financial cushion
If unexpected repair costs in thousands of dollars are putting a burden on your budget, spreading costs with a predictable premium can provide peace of mind. Even if you can pay from your pocket, having a backup plan can make homeownership less stressful.
Think about the time you want to spend on fixing your own repairs
If you want to avoid searching and reviewing contractors, a one-call home warranty service can be a lot of help.
Evaluate your home warranty plan
Before purchasing a home warranty, please make sure:
Review the details of your contract carefully: Coverage varies by plan, so be sure to understand exactly what is included, what is excluded, and payment restrictions. Most warranty has an upper limit per item or term and usually does not cover existing issues. Check costs and fees: In addition to your annual premiums, expect a service call fee for each repair request. Find out how long you are waiting: Many plans don’t start immediately, and there is a 30-day waiting period after purchase. Coordinate with a Redfin real estate agent to make sure the warranty is in effect when you close your home. Research your company’s reputation: Read reviews and ratings to see how your provider handles billing and customer service. Run some scenarios. Estimate whether you’ll save money compared to repair payments, especially if your system and appliance are new. Think about comfort. Think about whether you prefer predictable costs or don’t mind covering unexpected repairs yourself. Conditions to check renewal and cancellation terms: Most contracts renew automatically every year, so if your needs change, check how to cancel or adjust coverage.
Home Guarantee Alternatives
If you don’t feel that your home warranty fits properly, consider these other ways to prepare for unexpected repairs.
Establishment of Emergency Repair Savings Fund: Regular savings can create financial cushions as repairs occur. Rely on manufacturer’s warranty: Track the warranty that comes with your new appliance or system to take advantage of covered repairs. Buy an Appliance Specific Extended Warranty: Buy additional coverage for major appliances that may require additional protection beyond the manufacturer’s warranty. Investing in preventive maintenance plans: Regular inspections and coordination, such as HVAC services and plumbing inspections, can help prevent costly breakdowns.
Make a call: Do you need a home warranty?
So, do you need a home warranty? No – But it can be a smart way to protect yourself from expensive repairs and enjoy more security. By taking into account your budget, system age and how maintenance is handled, you can determine whether a home warranty or another approach is right for you.
Home Guaranteed FAQ
1.Do lenders need a home warranty?
No, the lender does not need a home guarantee. Unlike homeowner insurance, which usually requires mortgage lenders, home guarantees are completely optional. This is a service agreement that you can purchase for additional protection against unexpected repair costs.
2. What is the average cost of a home guarantee?
Typically, the average cost of a home warranty ranges from $300 to $600 a year, depending on your coverage level, home size and provider. You can also pay a service fee of around $75 to $125 each time you request a repair or replacement.
3. If I change my mind, can I cancel my home warranty?
Yes, most businesses cancel within the first 30 days asking for a full refund (minus any claims paid). You may then be charged a cancellation fee.
4. Are there any compensation restrictions I should know about for home warranty?
Most plans have a limit of per item or $1 per year. For example, $2,000 per appliance or $10,000 for a total annual bill. Always read detailed prints.
5. Does the Home Warranty cover code upgrades or permits?
Usually no. Some companies offer optional add-ons, but standard plans cannot lift the system into current code or cover permit fees.
6. What is the difference between home insurance and home insurance?
Home insurance covers damage from unexpected events such as fires, storms, theft and protects the structure and belongings of your home. Home Warranty, on the other hand, is a service agreement that you pay to repair or replace major systems and appliances that break down due to normal wear and tear.
