Home Warranty

First of all, a home warranty is not the same thing as homeowners insurance, nor is it a replacement for homeowners insurance. Homeowners insurance covers major perils such as fires, hail, property crimes, water damage, etc. that could affect the entire structure and/or the homeowner's personal possessions. A home warranty does not cover these perils. Rather, it covers specific components of the home.

A home warranty provides for discounted repair and replacement service on a home's major components, such as the furnace, air conditioning, plumbing and electrical system. It may also cover major appliances such as washers, dryers and refrigerators.

Home warranty companies have agreements with approved local service providers. When something breaks down, the home warranty company sends one of its service providers to examine the problem. If he determines that the needed repair is covered by the warranty, he completes the work. The homeowner pays a service fee.

A home warranty costs a few hundred dollars a year, paid in advance and can vary according to the type of residence covered, the state you're in and the level of service desired. Often they are offered by sellers as a buyer's incentive to the sale of the home.

In addition to an annual premium, home warranties charge a service call fee every time the warranty holder requests that a service provider come out to the house.

There are many companies that sell home warranties and the specifics of the policies they sell can vary greatly, so it pays to shop around.