Do You Have to Have a Home Warranty?

Homeowners often consider how to protect their investments in home systems and appliances. A home warranty is a service contract designed to cover the repair or replacement of various household items. This article clarifies whether a home warranty is a necessity and details what such a contract entails.

Is a Home Warranty Required?

A home warranty is not a mandatory purchase for homeowners. Unlike homeowners insurance, which mortgage lenders typically require to protect the physical structure from perils like fire or natural disasters, a home warranty is an optional service contract. No federal or state laws mandate its acquisition.

While not legally required, home warranties are sometimes offered by home sellers as an incentive during a real estate transaction. This offering does not, however, make the warranty a compulsory part of the home purchase. Homebuyers retain the choice to accept or decline such an offer, or to purchase a separate policy if desired.

What is a Home Warranty?

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances due to normal wear and tear. This contract helps homeowners manage unexpected costs associated with breakdowns of items like HVAC systems, plumbing, electrical wiring, water heaters, and kitchen appliances. The purpose of a home warranty is to protect a homeowner’s budget from potentially expensive repairs.

A home warranty differs from homeowners insurance. Homeowners insurance protects against damage from sudden, unforeseen events such as fires, theft, or natural disasters, covering the home’s structure and personal belongings. In contrast, a home warranty addresses mechanical failures of systems and appliances from everyday use. While their coverages do not typically overlap, they can complement each other.

Understanding Home Warranty Coverage

Home warranty plans typically cover essential household systems and appliances, such as:

• Heating and air conditioning (HVAC) systems
• Electrical wiring
• Plumbing systems
• Refrigerators
• Dishwashers
• Ovens
• Stovetops
• Built-in microwaves
• Washing machines
• Dryers

Coverage varies significantly between providers and plans, so review specific contract details. Common exclusions include pre-existing conditions, issues from improper maintenance or installation, and cosmetic damage. Some policies may also exclude specific parts of a system, like refrigerant in an HVAC unit, or have limits on repair or replacement costs. Optional add-on coverage might be available for items such as swimming pools, well pumps, or septic systems.

How Home Warranties Operate

When a covered home system or appliance malfunctions, the homeowner initiates a claim with the home warranty company, typically by phone or online. Upon filing a claim, the homeowner usually pays a service fee, sometimes called a trade call fee or deductible, for the technician’s visit. This fee is paid per service request.

The home warranty company then dispatches a qualified, pre-screened technician from their network to diagnose the problem. If the issue is covered under the terms of the contract, the company coordinates and covers the repair or replacement cost, up to the policy’s stated limits. The warranty company usually selects the technician and may have limitations regarding replacement models or brands.

Key Considerations Before Purchasing

Homeowners should evaluate several factors before purchasing a home warranty. Consider the age and current condition of the home’s existing systems and appliances; older items may be more prone to breakdowns, making a warranty potentially more appealing.

Assess the total cost of the warranty, including the annual premium and any per-service fees, against potential out-of-pocket expenses for repairs. Homeowners should carefully read the fine print to understand all exclusions, limitations, and coverage caps. Research the reputation of the warranty provider, their customer service, and their typical response times to make an informed decision.