What Is A Home Warranty?

By Real Estate Pros

If you are considering buying a home, condo or townhouse, then you should know about warranty plans.

The term Warranty is used to describe a variety of products. In some situations, new homebuilders use the term to describe the standard coverage they provide on items in a new home. In other contexts, it is used to describe an insurance policy purchased by a homebuyer or seller to cover items on a resale (not new construction). In this article, we are referring to the later type of policy -a policy purchased by a homebuyer or seller for a resale home.

In this context, a warranty is a service contract to maintain or repair, when needed, certain items in a home, condominium or townhouse. This type of warranty is an option for buyers wanting more coverage beyond items normally covered in a homeowners insurance policy. sellers sometimes purchase this type of policy and offer this as an incentive to homebuyers to purchase their home.

If a repair is needed during a covered period for items that are covered, then the homeowner simply contacts the Warranty Company to request service. The Warranty Company will send out a qualified professional to repair the item. The homeowner will usually have to pay a small deductible for a service call, and the warranty company covers the rest.

The warranty industry is a competitive business and items covered and costs vary from company to company. In general, many warranty policies cover: plumbing, heating, electrical system, water heater and major appliances, such as range/oven/cooktop, dishwasher, and garbage disposal. Policies are typically issued in one-year intervals, with the option to renew at the end of the year.

The cost of a policy varies from less than $200.00 per year for a small home, condo or townhouse, up to $1,000.00 or more for large properties with

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expanded coverage. So should you get a warranty? The answer is it depends on the condition and age of the home, your financial situation, and your level of risk tolerance.

A warranty may be a good idea if you are buying an older that is in poor condition. However, if you are buying a newer in excellent condition, then you may decide that there is less risk. In making your decision, be sure you carefully evaluate your financial situation and determine if you have the means to pay for a major repair should some costly item in the need repair or replacement. You should also carefully evaluate your homeowners insurance policy to determine what items are already covered.

A good inspector can provide you a through evaluation about the condition of a and its major systems before you sign a purchase contract. This information will help you decide on whether or not to purchase a warranty policy. In deciding if purchasing a warranty is for you or not, be sure you don't feel pressured in buying. Like other insurance products, a warranty is highly profitable for the issuing insurance company. Thoroughly research what the policy covers and understand your responsibilities before signing any document.

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