What is a home warranty? Should I buy this type of protection for a new home?

UPDATED: Feb 11, 2013

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Asked February 11, 2013

1 Answer

A home warranty is a special type of home insurance that covers things like your wiring, HVAC system, and appliances like dishwasher or refrigerator. This can be a very useful thing to have on older homes or for someone who is not able to appraise the condition of these items before purchasing the home. Whether or not you need a home warranty will depend on a number of factors, including your familiarity with the home, construction standards, and the age of the things covered by the home warranty.

A home warranty on a new home is not usually necessary. Just as the warranty on your store bought electronics will usually expire before the item breaks down, so will new appliances outlast the home warranty. In this case, purchasing a home warranty may give you some additional peace of mind, but there is not much likelihood of the home warranty being useful.

Your lender may make purchasing a home warranty a stipulation of the home loan. In this case, you have to purchase the home warranty, but you have the option of purchasing it from the company of your choosing. Beware of lenders who try to bully you into buying a home warranty directly from insurer. This is a questionable business practice and may indicate that the lender is aware of shortcomings in the home which may not be obvious to the untrained eye.

If you decide to purchase a home warranty, shop around to find the best protection at the best price. Make sure that the warranty includes your home's electric and wiring systems, and that it itemizes the appliances covered. As with homeowners insurance, be sure to read the fine print, because the things which are omitted from coverage may be as important as the things the home warranty does cover. For example, it is important that the home warranty covers your built-in appliances, such as a dishwasher, garbage disposal, and all of the parts of the heating and cooling systems.

Answered February 11, 2013 by Anonymous

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