HOW - Home Owner's Warranty
(Home Buyer's Protection Plan)
A Home Owner's Warranty is a protection plan (a type of insurance policy) that protects you, as the buyer, from incurring high costs of specified repairs after you purchase your home. Most companies offer plans for site-built homes only, but there are a few companies that offer plans for condominiums, mobile homes (trailers), and manufactured homes.
This type of warranty is different from a Builder's Warranty on a brand new home. With new construction the home builder typically warrants the entire home and all systems for 1 year. A home buyer's protection plan is limited in scope and only covers specific items.
It typically is purchased by a seller as an incentive to induce a buyer to make an offer on a home for sale. But, in some cases it can be purchased by the buyer of a home when the seller doesn't include it. Some protection plans can include coverage for the seller during the listing period.
Most companies offer a standard coverage paid for by the seller. Then you have the option of increasing the coverage by purchasing different levels of upgrades. When the seller is paying, payment is made at the closing from the proceeds of the sale. When the buyer is paying or obtaining upgrades the payment is included in the buyer's closing costs.
Coverage for existing homes typically extends for 12 or 13 months depending on the company. Some plans will offer you a renewal before it expires. There are a few companies that offer plans to cover the years 2 - 4 of new home construction which protects you after the builder's 1 year warranty expires.
As with other types of insurance there is a deductible, usually $50 - $100 per repair that is paid by you at the time of the repair. Costs over the deductible are paid by the home warranty company. There is a 24 hour - 365 days a year toll-free phone number to call when you need service and the warranty company will send you one of their certified insured contractors.
Different plans cover different items so make sure you read the list of coverage very carefully.
Usually the following items are included in standard plans:
Central Air Conditioner-Heat Pump, Gas-Oil-Electric Heater-Furnace, Ductwork, Plumbing System, Water Heater, Instant Hot Water Dispenser, Toilets, Sump Pump. Bathtub Whirlpool (Spa) Motor-Pump, Kitchen Refrigerator, Dishwasher, Oven-Range-Cooktop, Garbage Disposal, Built-In Microwave Oven, Trash Compactor, Electrical System, Exhaust Fans, Ceiling Fans, and Central Vacuum.
Premium plans include everything in a standard plan plus some of the following items:
Washer, Dryer, Swimming Pool, Well Pump, Garage Door Opener, Septic System, Limited Roof Leak, Pest Control, Hauling Away Debris, and Permits.
Some companies include, for an additional fee, items such as faucets, registers, and grills-racks.
As you can see, a Home Owner's Warranty (HOW) can increase your comfort when buying your new home. You will be protected against potentially huge repair bills for covered items. All you pay is a nominal service fee per repair call. So, it is in your interest as a first time home buyer to request that the seller provide this kind of an incentive when you make your initial offer on a home.