What is a Home Warranty?
A home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes and certain types of water damage that could affect the entire structure and/or the homeowner’s personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home.
A home warranty is a contract between a homeowner and a home warranty company that provides for discounted repair and replacement service on a home’s major components, such as the furnace, air conditioning, plumbing and electrical system. A home warranty may also cover major appliances such as washers and dryers, refrigerators and swimming pools. Most plans have a basic component that provides all homeowners who purchase a policy with certain coverages. Homeowners can also purchase one or more optional components that provide additional coverage at additional cost.
Benefits to a Home Buyer
A home warranty plan provides budget protection and peace of mind for home buyers who otherwise might not be able to handle unexpected repair bills at a time when they are usually least affordable.
Benefits to a Seller
Home warranties offer protection against costly repairs to sellers while the home is listed for sale, and peace of mind for the buyer (and seller) after the close of sale. In addition, homes listed with a home warranty are more attractive to potential buyers and tend to sell faster and closer to the asking price.
Information deemed reliable but not guaranteed, contact your mortgage, tax and legal professionals more details.