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What You Should Know About Home Warranties

What You Should Know About Home Warranties - The Beacon


By: Beth

What You Should Know About Home Warranties

The cost of owning a home can be significant. Often additional costs present themselves within the first year, requiring consumers to shell out much more than they had planned for when purchasing the home.  Pipes burst, heaters break, and homeowners are left with repair bills they hadn’t anticipated.

MSN Money suggests that while most consumers have never heard of these home warranty policies that are designed to cover the kinds of mechanical breakdowns that regular home insurance doesn’t, those planning to purchase a home may want to consider looking into home warranty options.

Here’s how the warranties work:

  • For an annual fee of $250 to $600, the warranties cover repair or replacement of basic home systems such as plumbing and heating, plus major appliances. Air conditioning, pools, spas, wells and sometimes roofs can typically be added to the basic policy for an extra fee.

  • The warranty company contracts with local repair companies to provide service. If something breaks, the homeowner calls the warranty company, which arranges with the local company to dispatch a repair technician.

Although some homeowners report that their policies paid for expensive repairs, others note that it can be difficult to schedule a service call. That is, once consumers get the warranty company to agree to cover the cost.

Major obstacles included lack of control over who performs the repair work.

The FTC wants consumers considering purchasing a home warranty to understand fully what it covers, how to make a claim, and how to resolve disputes. With new homes particularly, many warranties are backed by the builder while others are purchased by the builder from an independent company. Some home owners purchase additional coverage on their own from third-party warranty companies to supplement the coverage their builder provides.

Consumers should also know that most warranties for new homes do not cover the cost of a major construction defect or warranty repair, like the cost of having to move out of one’s home while repairs are being made. (Also, don’t expect the policy to cover appliances, cracks in brick or tile, or items covered under a manufacturer’s warranty.)

The FTC also informs consumers that, with any warranty agreement, ask the following questions: 


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Beth was Director of BBB Services and wrote for the consumer education blog from 2008 to 2011. Beth also managed projects of the Tri-State Better Business Bureau Foundation, including the Student of Integrity Scholarship and senior citizen education programs, and she worked with local charities as a part of our charity reporting service.