The time leading up to a new home purchase can be confusing and stressful. Between saving up for a down payment and worrying about how much the closing costs will add up to, the last thing anyone wants to think about is the possibility that a new home might come with worn out appliances or a ticking time bomb of a plumbing system. One way to combat the stress of additional unexpected expenses when buying a new home is to consider a home warranty.

What is a Home Warranty? 

A home warranty is a service contract that covers repair costs from normal wear and tear on large home appliances (like refrigerators or ovens) and home systems (including electrical systems, HVAC, and plumbing). A home warranty is particularly useful for older homes where the buyer is unsure of the condition of these appliances and systems. Instead of paying hundreds or even thousands of dollars for a replacement or repair, the homeowner is only responsible for a small service fee, typically less than $150.

The details of specific home warranties can vary, so it is important to check the fine print. Some companies have set limits on how much they will pay for certain appliances or systems. Coverage can also depend on the reason for the failure. For example, home warranties generally do not cover damage from natural disasters or lack of maintenance. The service contract will outline the exact terms of what is covered and what is not.

Is a Home Warranty the Same as Homeowners Insurance?

A warranty for a new home might sound a lot like homeowners insurance, but they are distinct from each other. Home warranties cover appliances and systems damage from wear and tear over time, while homeowners insurance covers damage to the physical house from fires and natural disasters (and oftentimes theft as well). The details of what homeowners insurance covers will vary somewhat from plan to plan, but will still differ from the coverage of a home warranty. Having both offers a more comprehensive coverage of a new home.

Another big difference between home warranties and homeowners insurance is that homeowners insurance is required by most lenders. So, as long as there is an active mortgage, the homeowner must have homeowners insurance, while the warranty is optional.

Who Pays for a Home Warranty?

This can go either way. Some sellers will offer a home warranty for the first year after the buyer purchases the home as a way to sell the house faster and give the buyer peace of mind while they get to know their new home. The buyer can choose to extend coverage beyond the first year if they feel it is necessary.

However, during a seller’s market, the seller might not feel the need to offer this extra incentive. In this case, if a buyer thinks a home warranty is needed, they can purchase it themselves or try to negotiate with the seller to buy it. 

Why Home Warranties are a Good Idea When Purchasing a New Home

With all the hassle that goes into buying a new home and moving into it, a buyer might be tempted to simply put the cash that would be spent on a home warranty into a savings account for possible issues that might arise. Of course, this is always an option…but it might not be the best choice. (The exception here is if the home is a new construction, in which case it is still under a builder’s warranty and the appliances are probably still under a manufacturer’s warranty, too. In this somewhat rare case, a home warranty is redundant.)

However, for those that are buying a previously owned home, the cost of unexpected repairs can easily surpass the cost of a home warranty. Overall, a warranty on a new home can offer a variety of benefits.

Comprehensive Coverage

The combination of homeowners insurance and a good home warranty provides comprehensive coverage for the entirety of the home. Home buyers can rest assured that if anything goes wrong with any part of their home, they won’t have to unexpectedly shell out an exorbitant sum of money. This can help keep tight finances in check and ensure the new homeowner that they can stay within their home buying budget.

Quick and Reliable Repairs

Many home warranties, including our HSA Home Warranty, make repairs easier for the new homeowner. Instead of spending time researching the best HVAC repair company or the most reliable electrician, the new homeowner can just make a quick call to their warranty provider and rest easy, knowing that they’ll send out a trustworthy person who will get the job done quickly. 

Peace of Mind

Knowing that appliance and home system failures are covered financially will relieve a lot of stress from the home buying process. But, in addition to this, home buyers with a warranty on their home also have the peace of mind in knowing that their home warranty company will find reliable and trustworthy professionals to fix any problems. This peace of mind lets a new homeowner be excited about their new home, instead of worrying about how to fix it.

Renewable Coverage Options

Unlike homeowners insurance, home warranties generally offer a variety of options when it comes to renewal. Some homeowners are happy with only being covered for the first year in their new home, while others might want another year or to get continuous coverage. Those with older homes and systems that haven’t been updated might want to opt for longer term coverage. The best part, however, is that this decision does not have to be made at the time of purchase. The buyer can opt for a year of coverage and get to know their new home a little better before making that decision.