Who Pays for Home Warranty in California?

A home warranty is a service contract designed to cover the repair or replacement of major home systems and appliances that break down due to normal wear and tear. Unlike a homeowner’s insurance policy, which typically covers damage from sudden, unforeseen events like fires or natural disasters, a home warranty addresses issues arising from routine use and aging equipment. It serves to reduce out-of-pocket expenses for common household repairs.

Components of Home Warranty Costs

A home warranty involves two main financial components: an annual premium and a service call fee.

The annual premium is the upfront cost paid for the warranty coverage, similar to an insurance premium. In California, these annual premiums typically range from $499 to $972. This yearly payment secures the contract for a set period, usually 12 months.

The second component is the service call fee, often referred to as a deductible or trade call fee. This is a per-incident fee that the homeowner pays each time a covered repair is needed and a technician is dispatched. Service call fees in California generally range from $75 to $125 per visit. This fee is paid directly to the service technician at the time of the visit.

Payment Practices in California Home Sales

In California, the initial payment for a home warranty premium is frequently handled during the home sale transaction. It is most common for the seller to pay for the home warranty as part of the closing agreement. Providing a home warranty can also help a property stand out in the market, potentially expediting the sale and reducing the seller’s liability for post-sale issues.

The cost of the home warranty is typically included in the sales contract and settled through escrow at closing, often deducted from the seller’s proceeds. While sellers commonly cover this expense, buyers may also choose to purchase a home warranty independently. In some instances, the cost might be negotiated and split between the buyer and seller. Real estate agents sometimes offer to cover the cost of a home warranty as a gesture of goodwill or as a marketing tool to facilitate the transaction.

Homeowner Responsibilities for Claims

Once a home warranty is in place, the homeowner assumes specific responsibilities when a covered item malfunctions. The process typically begins with the homeowner identifying the issue and reviewing their contract to confirm coverage. Next, the homeowner contacts the home warranty company to file a claim, which can usually be done online or by phone.

Upon filing a claim, the homeowner is responsible for paying the service call fee directly to the technician when they arrive to diagnose the problem. After the diagnosis, if the issue is covered under the policy, the home warranty company coordinates the repair or replacement, covering costs beyond the service fee, up to the policy’s limits. Homeowners are responsible for any costs if a repair is not covered, such as for pre-existing conditions known at the time of purchase, or if the repair expense exceeds the policy’s stated coverage limits.