• 13/05/2021

What is a Home Warranty?

When you purchase a new home, you are bound to worry that things will go wrong. A major appliance, such as the freezer or washing machine, may fail, there could be an issue with the plumbing, an electrical fault, and so on.

A Home Warranty offers you protection against these kinds of problems. They are designed to cover things that home insurance policies do not. In actual fact, a home warranty is a service contract that covers the cost of repair or replacement of the covered items, such as plumbing and appliances. However, a home warranty does not cover everything, and it is essential to understand what it does cover before you purchase one.

The Different Between Home Warranties and Home Insurance

Home insurance is designed to protect you financially in the event of unforeseen damage to your home as the result of something like a fire. Home insurance can cover possessions if you choose to add personal property coverage, but it doesn’t always. As a general rule, you are required to have home insurance if you have a mortgage on your home.

Mortgage lenders do not require you to have a home warranty, and as discussed above, it is used to replace specific appliances or repair specific systems in the event of a malfunction.

How Does a Home Warranty Work?

While a home warranty is not home insurance, it does work in a very similar way. You will pay an annual premium for each year that you want to be covered by the warranty. The premium will depend on various factors such as the size of your home, and the cost generally begins at a few hundred dollars. A standard warranty will usually cover a home of up to 5,000 feet and anything above that requires an additional payment. There are of course other factors that affect the cost, including the type of property e.g. a condo, townhouse, duplex, etc. and the age of a property.

In the event that something then goes wrong in your house and you need to draw on the warranty, you will pay a deductible. The amount of the deductible will vary according to the terms of your warranty. The warranty company will then send out an engineer to make the required repairs or replace an appliance if needed.

The Benefits of a Home Warranty


The first major advantage of having a home warranty is peace of mind. If something goes wrong, you know that a professional will soon be there to fix it without any real hassle. This is particularly useful if there is no one in the house who is good at repairs. Home warranties can also help new homeowners, and particularly first time buyers, as they will probably not be very familiar with how the new home’s systems operate.

Furthermore, if you are on a tight budget or do not want a large financial shock, a home warranty can be a true lifesaver. While you will be paying for the warranty, you can budget for this and you will not have to worry about unexpected costs. You will also know what the deductible will be for any repairs, and can plan for that as well.

Most of the time a warranty will pay for itself. You may be paying a few hundred dollars a year, but this is likely to be far less than the cost of replacing a major appliance or repairing a serious problem with a building’s systems. Major problems with plumbing or electricity can cost thousands of dollars to fix and if you do not have the money saved then it could cause you real problems. With a home warranty, this ceases to be an issue.

Home warranties are most often discussed in relation to people buying new homes. However, they can also be a major asset when selling your home. If you have paid for a warranty then it will pass to the new buyers and this can certainly help to attract more buying interest. On the other side of the coin, you may find yourself with a free home warranty if you move into a house that has one.

Are There Any Drawbacks to Home Warranties?

As with anything, there are a few negatives to home warranties, but these can be mitigated through proper research and planning. For instance, a home warranty will not cover everything, but as long as you are aware of this, it should not cause any problems.

The one thing you do need to be very aware of is that most home warranties will not cover items that have not been properly maintained. Unfortunately, this is a very subjective concept and this clause can lead to disputes between you and the warranty company. This often becomes an issue when moving into a new home and finding that the previous owner did not look after the house properly. Once again, this problem can be avoided by proper research and discussions with the warranty company.

Some people will resent the fact that they have to pay for the warranty each year but not draw on it. It is far better to view the warranty as an investment that is there to draw upon should you ever need it and one that can save you a great deal of stress.


Home warranties certainly deliver peace of mind. By paying a relatively small premium, you can be sure that you are covered should anything go wrong. You can avoid the stress of suddenly having to buy new appliances or paying a small fortune to repair your home’s infrastructure.

Not all home warranties are the same and it is essential that you make sure you know what is and isn’t covered. However, this just means that you need to research properly before paying for one. The benefits of having a good home warranty far outweigh any negatives, and should you ever need it, you are sure to be thankful that you decided to invest in one.

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