Home Warranty: Definition, What It Covers, and Importance

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances that break down due to normal wear and tear. Unlike homeowners insurance, which covers damage from events like fire or theft, a home warranty protects you from the cost of unexpected breakdowns in things like your HVAC system, water heater, plumbing, or kitchen appliances.

Home warranties are commonly purchased by homebuyers during a real estate transaction, either as part of the negotiation or as an added layer of post-purchase protection. In some cases, sellers may offer a one-year home warranty to make the property more appealing to buyers.

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What Does a Home Warranty Cover?

While coverage can vary depending on the provider and plan, most home warranties include protection for essential systems such as electrical, plumbing, heating and cooling, and major appliances like ovens, dishwashers, and refrigerators. Some plans offer optional coverage for items like pools, spas, or washers and dryers.

It’s important to understand that home warranties don’t cover everything. They typically exclude pre-existing conditions, structural components, cosmetic issues, and items not properly maintained. Each claim is subject to specific limits and service fees, which homeowners pay when a repair technician is dispatched.

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Why a Home Warranty Matters

For new homeowners especially those without a trusted network of contractors or the budget to handle major repairs a home warranty provides peace of mind. It acts as a financial safety net and can simplify the process of dealing with unexpected maintenance. Rather than searching for service providers, homeowners can submit a claim directly to the warranty company, which then coordinates the repair.

For sellers, offering a home warranty can increase buyer confidence and help a property stand out in a competitive market. It also reduces the risk of post-sale disputes over repairs. Real estate professionals often recommend warranties in transactions involving older homes or first-time buyers.

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Final Thoughts

A home warranty is not a replacement for homeowners insurance, but it can complement it by covering issues insurance typically doesn't. For both buyers and sellers, it offers added protection and convenience during a time when repairs or breakdowns can be costly and stressful. While not every home needs one, a home warranty can be a valuable tool for managing homeownership risks especially in the first year after purchase.