There are all kinds of warranties you can purchase these days. Did you know there are warranties for your home? These are not the kind of home warranties that new construction builders provide. New construction builders provide warranties on the construction of a new home. "Home Warranties" are essentially an insurance policy for any homeowner to purchase. According to the company Choice Home Warranty, "A home warranty is a service contract that helps protect homeowners against the cost of unexpected, covered repairs of their major systems and appliances that break down due to normal wear and tear."

The Basics of Home Warranties

There are quite a few home warranty companies to choose from. Among the major brands are American Home Shield, Choice Home Warranty, Home Warranty of America, Select Home Warranty, ServicePlus Home Warranty, and Liberty Home Guard. Most of them have multiple policies with varying levels of coverage and deductibles available. They all basically cover the major components and systems in your home. These include your HVAC system, water heater, plumbing, electrical, garage door opener, appliances and more. It's likely you'll pay more for appliance coverage with some companies.

The cost of a home warranty ranges from approximately $450 to $650 per year, depending on the company and coverage level you choose. The price also depends on the style and size of your home. For example, a warranty on a condominium or townhome costs less than a warranty for a single-family home. Typically, home warranties for homes over 5,000 square feet cost more. Many of the companies have a la carte optional coverage which you can add for components such as pool or spa, central vacuum, septic system, and the like. When you file a claim, there is a deductible, or service call fee, that must be paid. These average approximately $75 to $100 per claim.

When Home Warranties Make the Most Sense

When determining the value of a home warranty, the basic rule of thumb is that if it covers and pays for more repairs or replacements in your home than the annual cost and service fees, you're ahead. It is difficult to determine if this will be the case when you purchase a home warranty. However, if your home has older systems and appliances, it may behoove you to purchase a home warranty. Sometimes, home sellers offer home warranties to buyers as marketing incentives when listing their homes. Buyers may see this as adding to the home value. Some buyers may even pay more for a home with a home warranty. Other buyers purchase one right after closing. It's not uncommon for a real estate agents to give their buyers a home warranty as a closing gift.

How to File Claims and Deductibles

Most home warranty companies have online systems where you can file claims. Another option is to call their service phone numbers. Most companies are available 24 hours a day, seven days a week for claims. After the warranty company takes your claim, they will assign a service company, who is affiliated with the warranty company, to come out and take care of the repair or replacement. You will pay the service fee to the company that comes out. They will work with the warranty company to cover the remainder of the bill.

If you live in a newer home and your builder's warranty has expired, it might not make much sense to purchase a home warranty until your home is at least five to eight years old. You might not have any claims the first eight years or so. However, it is completely up to you as to when you purchase your first home warranty if you are going to do so. Manufacturers are not making appliances and home systems like they used to. It is not uncommon for appliances or home systems to need repairs or replacements in the first five to eight years, or even sooner. Keeping up with your home's repairs will add to your home value. Home warranties can make this easier and hopefully less expensive for you in the long run.