Home Warranty
Definition and meaning of Home Warranty in real estate.
A home warranty is an annual service contract that covers the repair or replacement of major residential systems and appliances, such as heating, plumbing, electrical, and kitchen appliances, that break down due to normal wear and tear. It is distinct from homeowners insurance, which covers accidental damage from hazards like fire or storms.
In more detail
Sellers often purchase these contracts as a marketing incentive for buyers, or buyers may buy them during a transaction to protect against post-closing repair costs. When a covered item fails, the homeowner contacts the warranty provider, who dispatches an approved contractor to diagnose and fix the issue.
The homeowner typically pays a fixed service call fee for each visit, while the warranty company covers the remaining repair costs up to contract limits. It is important to read the contract terms carefully, as certain items, pre-existing conditions, and lack of maintenance are often excluded from coverage.
Key facts
| Category | Buying & Selling |
|---|---|
| Contract length | Typically one year, renewable |
| Who pays | Can be paid by buyer or seller |
| Costs | Annual premium plus service call fees |
A homeowner experiences a water heater failure shortly after moving in, and their home warranty covers the replacement costs minus a standard service call fee.
Frequently asked questions
Does a home warranty cover roof leaks?
Standard home warranties generally do not cover roofs, but many providers offer optional add-on coverage for roof repairs for an additional annual fee.
How does a home warranty differ from homeowners insurance?
A home warranty covers system failures due to age and wear, while homeowners insurance covers structural damage caused by unexpected events like fires, windstorms, or theft.
Related terms
Sources & references
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