Home Warranties: What Homeowners Should Know Before Buying Coverage

Home Warranties: What Homeowners Should Know Before Buying Coverage

A practical guide for buyers and sellers in Central Ohio

Buying a home is an exciting milestone, but ownership comes with ongoing maintenance and repair responsibilities. A failed water heater, broken air conditioner, or malfunctioning appliance can create a large, unexpected expense.

A home warranty may help homeowners manage certain repair costs. However, it is important to understand what a home warranty covers, how it differs from homeowners' insurance, and what limitations may apply before deciding whether coverage is right for you.

What Is a Home Warranty?

A home warranty is more accurately called a home service contract. It is an agreement that may help pay for the repair or replacement of specifically covered home systems and appliances when they fail from normal use.

A home warranty is not the same as homeowners' insurance. Homeowners' insurance generally addresses losses caused by events such as fire, theft, storms, or certain types of water damage. A home warranty typically addresses the breakdown of covered equipment, subject to the contract’s limits, exclusions, service fees, and approval requirements.

Because a home warranty is a contract rather than a blanket guarantee, the first step is identifying which systems and appliances are actually named in the plan.

·       Heating and air-conditioning systems

·       Plumbing systems

·       Electrical systems

·       Water heaters

·       Refrigerators

·       Ovens and ranges

·       Dishwashers

·       Washers and dryers

·       Garage-door openers

Coverage varies by provider and plan. If a system or appliance is not specifically listed, or if an exclusion applies, the claim may not be approved.

Why Consider a Home Warranty?

A home warranty is not appropriate for every homeowner, but it may provide a defined process for requesting service and may help reduce the financial impact of a covered breakdown.

·       Buyers purchasing an older home

·       Homes with aging appliances or major systems

·       Homeowners with limited emergency savings

·       Buyers seeking added protection during the first year of ownership

·       Sellers who want to offer a potential benefit to a buyer

·       Homeowners who prefer a designated service process

Coverage remains subject to service fees, claim approval, repair limits, exclusions, and contract terms. A warranty does not mean that every repair will be completed at no cost.

Home Warranty vs. Homeowners Insurance

Home warranties and homeowners insurance address different risks and should be evaluated as separate tools.

A Home Warranty May Help With:

·       Covered equipment breakdowns

·       Certain normal-wear-and-tear failures

·       Approved repairs or replacements

·       Optional items added to the plan

Homeowners Insurance May Help With:

·       Certain fire, storm, theft, and other covered losses

·       Covered property damage

·       Certain liability claims

·       Temporary living expenses resulting from covered events

A home warranty generally does not replace homeowners insurance. Insurance is designed primarily for significant covered losses, while a warranty addresses certain breakdowns involving listed systems and appliances.

Home Warranty vs. Builder Warranty

Buyers purchasing newly constructed homes should distinguish between a builder warranty and a home service contract.

A builder warranty may address certain construction-related defects for a specified period. A home service contract generally focuses on repairing or replacing covered appliances and systems after ownership begins.

The coverage period, exclusions, and responsibilities can differ significantly. Buyers should carefully review the builder’s documents and determine whether additional coverage would provide meaningful protection.

What a Home Warranty May Not Cover

Understanding exclusions is just as important as understanding benefits. Common limitations may include:

Pre-Existing Conditions

A provider may deny a claim if the problem existed before coverage began or if the issue was already known or documented.

Lack of Maintenance

Many contracts require appropriate maintenance. Failure to service equipment may affect claim approval.

Improper Installation

Problems caused by incorrect installation, unauthorized modifications, or improper repairs may be excluded.

Code Requirements and Permits

Permits, code upgrades, equipment modifications, disposal, or compliance work may be limited or excluded.

Cosmetic Damage

Scratches, dents, finishes, discoloration, and similar appearance issues are generally different from mechanical failures.

Specialty Equipment

Wells, septic systems, pools, spas, roofs, and additional refrigerators may require optional coverage or may be excluded.

Homeowners should read the complete agreement and pay close attention to exclusions, reimbursement limits, waiting periods, maintenance requirements, and claim procedures.

Understanding Service Fees and Coverage Limits

Even an approved claim may involve an out-of-pocket expense. Most plans require a service-call fee when a claim is submitted.

1.         How much is the service-call fee?

2.         Is the fee charged even when a claim is denied?

3.         Is there a maximum benefit for each system or appliance?

4.         Are there annual or lifetime limits?

5.         Who decides whether an item is repaired or replaced?

6.         Can the homeowner choose the contractor?

7.         Is replacement equipment comparable to the original?

8.         Are labor, permits, disposal, and code upgrades included?

9.         Is there a waiting period before coverage begins?

10.    Can the coverage be transferred if the home is sold?

A low annual premium may not provide significant protection if fees and coverage limits leave the homeowner responsible for a large remaining balance.

Is a Home Warranty Worth the Cost?

The value of a home warranty depends on the home, the specific contract, and the homeowner’s financial position.

A Warranty May Be Valuable When:

·       Major systems are older

·       Several appliances approach the end of their expected service life

·       A large repair would strain the household budget

·       The provider has a strong reputation

·       The homeowner understands the plan’s limitations

Coverage May Be Less Valuable When:

·       Systems are newer and covered by manufacturer warranties

·       The plan excludes the items most likely to fail

·       Service fees and limits significantly reduce the benefit

·       The homeowner has a sufficient repair reserve

·       The claims process or contractor network is inconvenient

Compare the plan’s total cost with the potential value of the protection, rather than purchasing coverage based only on the promise of peace of mind.

The Parrish Team’s Recommended Home Warranty Provider

For clients considering additional protection after closing, The Parrish Team recommends America’s Preferred Home Warranty as a provider worth reviewing.

America’s Preferred Home Warranty offers plans for various major systems and appliances, and certain plans allow homeowners to select a licensed contractor for covered repairs. Because coverage, costs, fees, limits, and exclusions vary, buyers should review the complete service agreement before deciding.

A warranty may be especially useful during the first year of ownership, when an unexpected HVAC, plumbing, electrical, water-heater, or appliance failure could create a significant expense.

A home warranty is not a substitute for a professional inspection or homeowners insurance. The protection provided depends entirely on the individual service agreement.

·       Confirm which systems and appliances are covered

·       Understand the service-call fee

·       Review repair and replacement limits

·       Check exclusions and pre-existing-condition provisions

·       Determine whether permits, disposal, labor, and code upgrades are included

·       Compare the contract with the home inspection findings

·       Keep maintenance records after closing

·       Confirm transfer and cancellation requirements

For additional information about plan options and contract terms, visit America’s Preferred Home Warranty directly or speak with a representative. Coverage is subject to the individual service agreement’s terms, conditions, limitations, and exclusions.

Tips for Buyers

A home warranty should complement, not replace, normal due diligence. Before closing, buyers should:

·       Schedule a professional home inspection

·       Determine the age and condition of major systems

·       Ask for maintenance and repair records

·       Review existing manufacturer warranties

·       Budget for repairs that may not be covered

·       Confirm when coverage begins

·       Keep receipts and maintenance records

An inspection helps identify the home’s visible condition at the time of purchase. A warranty may help address certain covered failures that occur later.

Tips for Sellers

Some sellers offer a home warranty as a marketing benefit or negotiated contract term. This can make a listing more attractive, but sellers should understand exactly what is being provided.

·       Select a reputable provider

·       Review the plan’s coverage and exclusions

·       Understand who pays for the contract and service fees

·       Describe the warranty accurately

·       Keep a copy of the agreement

·       Avoid representing the warranty as a guarantee against future repairs

A warranty may complement a well-prepared listing, but it does not replace proper disclosure, realistic pricing, or timely maintenance.

The Bottom Line

A home warranty can provide valuable support, but it is not a complete solution for every repair. The right decision depends on the home’s condition, the age of its systems, the contract terms, and the homeowner’s available savings.

Before purchasing coverage, compare the premium, service fees, coverage limits, exclusions, provider reputation, and claims process. Understanding the details beforehand can help prevent frustration when a repair is needed.

HAVE QUESTIONS ABOUT BUYING OR SELLING A HOME?The Parrish Team is here to help you navigate inspections, negotiations, warranties, closing, and homeownership.Visit www.chipandsue.com or contact The Parrish Team today.

The Parrish Team | Keller Williams Classic PropertiesGuiding You Home, Every Step of the Way.

Disclaimer: Home warranty contracts vary by company and state. This educational content is not legal, insurance, or financial advice. The Parrish Team’s recommendation of America’s Preferred Home Warranty does not guarantee claim approval, repair quality, availability, or coverage. Compensation may be received through a referral relationship, where applicable. Review the complete service agreement and consult appropriate licensed professionals before purchasing coverage.