Factors to Consider Before Purchasing a Home Warranty

A home warranty is a contract that covers the cost of maintaining or replacing systems in the home for a predetermined amount of time. For example, a home warranty may cover repairing or replacing an air conditioning unit, a heating unit, or appliances in the home. A home warranty and home insurance are two completely different things.

Where Do You Get a Home Warranty?

If you purchase a newly constructed home, the systems and appliances in your home are likely covered by a builder’s warranty. A builder’s warranty is going to cover the same things that a home warranty will cover.

The seller might buy a home warranty for the buyer. This is a perk to encourage the buyer to purchase the property. The buyer will then have more confidence in the real estate transaction.

Conversely, the buyer might purchase the home warranty to add protection when purchasing the home. Real estate agents might purchase a home warranty and give it to new buyers. The title company may also purchase a home warranty.

Home warranties are sold by home warranty companies. Some prominent names in this field include AFC Home Club, First American Home Warranty, OneGuard Home Warranties, and American Home Shield.


What Are the Pros and Cons of Home Warranty Policies? 


  • Peace of Mind – It is frustrating to pay an exorbitant bill for a major repair. This is especially frustrating if you just used much of your savings to make a down payment on a home. Fixing a damaged air conditioner could cost you thousands of dollars. A home warranty lets you put some of that financial risk on the warranty provider.

  • Convenience – When an appliance breaks, it’s time consuming to find someone to fix it. Home warranties let you jump over that step. You simply call the service company. The company then makes the arrangements to get the appliance or system repaired.


  • Service Fees – The warranty may cover most of the repair expense. However, it doesn’t cover everything. When an incident happens, you might have to pay a service fee that could range from $50 to $75. If it requires multiple technicians, you may need to pay a fee for each technician.

  • Fine Print – Warranties are great if they cover what you need covered. You need to read the fine print to make sure that the major systems in your home are actually covered. Some might require additional fees for extra protection.

  • The fine print could show that a claim will be denied if a system was not properly maintained. You may need to show proof of maintenance. If you purchase a home with an old AC unit that was never maintained, the warranty may be pointless.

  • Loss of Control – It might be comforting to know that the warranty company takes charge of the repairs. However, this also means that you have little to no control over who does the repairs or the quality of parts being used.


If you are purchasing an older home and don’t have cash set aside for repairs, a home warranty might be right for you. However, if you are purchasing a newer home and you have some cash set aside, you may want to skip the home warranty.


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