Buying a home is one of the most exciting, not to mention most expensive investments you’ll make. From choosing the perfect neighborhood to securing the right home loan, closing on your new home brings about a new set of responsibilities.

When it comes to protecting your new home, having a home warranty in place isn’t always a top priority. While most people have homeowner’s insurance but negate a home warranty. Oddly enough, some new homeowners aren’t aware that their new property came with a home warranty, which leads us to our next point.

Home Warranty Limitations

Even if you move into a brand-new construction, there’s always a chance that something inside the home will break down. In fact, homes that are considered new construction may have a higher risk of appliances malfunctioning than homes that were previously lived in and maintained.

Having a home warranty in place protects you and your investment; however, it’s important to understand what’s covered under your warranty and what isn’t. All home warranties are not the same. Some offer coverage for major appliances and household systems while others also offer additional coverage for possible problems on the property outside.

For example, your neighbor’s home warranty may only offer protection if their kitchen appliances stop working whereas your home warranty includes all major appliances and your pool out back.

It’s important to read the fine print and make sure you know what’s covered and how long the coverage is in effect. Never assume that you have ongoing coverage without the possibility of a lapse. Make sure that you know when the warranty expires and what you need to do to keep it active.

If you’re not able to reinstate your home warranty, you can purchase a new one, if possible. You can also create an emergency home repair fund, so you’re never without funds for unexpected repairs. A good rule of thumb is to have at least three months’ worth of bills stashed away for home repairs or medical emergencies. If that isn’t feasible, save as much as you can each month.

You Don’t Need Multiple Policies

The truth of the matter is you don’t need every type of home policy to keep your home and appliances safe. When it comes to purchasing a home warranty, people have the choice between optional coverage or paying for a premium. Regardless of the choice, people are able to get the right amount of protection they need.

For example, let’s say that someone wanted to have extra coverage their pool. Certain belongings like this are not covered by a basic warranty plan; however, a homeowner is more than able to add it to a premium plan. Shop around for home warranties and see what each plan offers for in coverage. Only purchase a warranty that you know will be put to good use, if needed.

Home Warranty versus Home Insurance

Home warranties are not the same as home insurance policies. Despite the similarities between these two products, they are vastly different. To start, a home warranty is something that covers various parts of a home and covers you if the need for a repair arises. For first-time home buyers, home warranty plans are essential because some may not have factored in the cost for an unexpected repair or replacement for their appliances.

A home policy, on the other hand, doesn’t cover repairs like warranties. Instead, it covers any losses of assets or damages to the property. For example, let’s say your house was involved in a fire and about half of the house, in addition to everything you own, was destroyed. Your homeowner’s insurance company will cover the cost of repairs as well as reimburse you the money for any significant assets lost in the fire. This will depend on the amount and type of homeowner’s insurance you currently have in place.

You May Have to Pay

Similar to an insurance deductible, you may still have to pay out of pocket for repairs or replacement. The exact amount will depend on the type of coverage you have and the dollar amount that’s under warranty. For example, you may have coverage for repairs of kitchen appliances up to $500. That means, any amount that surpasses $500, you will be responsible for.

It’s also important to remember that it’s not only older appliances or HVAC, plumbing or electrical systems that break down. Appliances that are right out of the box can malfunction as well. For this reason alone, it’s important to have a home warranty in effect that covers both used and new appliances.

Not All Warranties are Transferable

When you buy a home, the home warranty is usually transferable for full coverage for a set period of time. However, this is not true in all cases. In some instances, the home warranty cannot be transferred, so if you want warranty coverage on household systems and appliances, you might need to purchase it yourself.

Keep in mind that when you buy a home, most sellers have a home warranty in place. It gives you the protection you want and the incentive they need to sell their home.

Wrapping Up

As with any type of insurance plan or warranty coverage, you need to weigh the pros and cons. You also need to focus on how the warranty fits your specific situation and not what you read online. If you’re a first-time home buyer, ask that the home warranty be part of the closing package. Although most people selling their homes do have a warranty in place, not all do. If they’re eager to close, they’ll happily put on in place, at least for the first year after resale.

Home warranties are as personalized as health insurance. While one person needs only minimal coverage, another may need or want as much protection as possible. Regardless of whether you buy a home warranty, renew it or it’s transferred at closing, make to read the fine print.


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