My Perfect Mortgage
Home Protection Warranty Benefits and Considerations
3 minute read
July 10, 2017

A home protection warranty is a contract between a homeowner and a company that agrees to repair or replace many of the home's appliances and systems during the contract period. Coverage usually includes systems like air conditioning, heating, plumbing and electrical, and appliances like washers, dryers, and dishwashers.

Often, the seller of a home will purchase a home protection plan for the buyer as part of the sales contract. This provides the buyer with peace of mind that they are protected should something in the home break down shortly after purchase, and the seller has some assurance that the buyer will not complain to them about things breaking down once the sale has been completed. If the seller refuses to purchase a home protection plan, the buyer can purchase one after the sale is final.

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How A Home Protection Warranty Works

When something in the home stops working, the homeowner should call the contracted home warranty company to initiate a claim. Once the company verifies that the problem is covered, or potentially covered, by the home protection plan, it will send out a service provider that works with them to assess and repair the problem. If a repair is not possible, the home warranty company will replace the malfunctioning system or appliance. Generally, the only expense incurred by the homeowner is a nominal service call fee, regardless of the cost of the repair or replacement.

A home protection warranty has several benefits, including:

  • Inexpensive annual cost - Home protection plan contracts are generally for one year, and usually cost between $300 to $500, plus the service call fee, which you'll pay each time you make a claim. Service call fees vary by company but are usually in the $50 to $100 range.
  • You get expensive repairs or replacement for a fraction of the cost - Even if the repair or replacement cost is thousands of dollars - for example, if you need a new air conditioning unit - you will not have to make additional payments unless the cost exceeds any limits imposed by the plan.
  • You don't have to locate your own service providers - The warranty company will send out their contracted providers, so you won't have to worry about finding a plumber, electrician, etc.
  • You can customize the plan to fit your needs - Most warranty companies offer different plans with varying options and levels of coverage so you can pick one that best suits your home.

There are downsides to a home protection plan, including:

  • Exclusions - Many plans do not cover pools, faucets, and outdoor sprinklers. Other exclusions may apply, depending on the plan purchased.
  • Limits on repairs - The plan may include limits on the amount of money the home warranty company will spend to perform a repair or replacement, or for the overall contract. Thus, in the new air conditioning unit example above, if the replacement cost is $12,000, but the contract contains a $10,000 limit, you'll have to pay the additional $2,000.
  • No control over service providers - You don't have to worry about finding a repairman, but you also don't get to select your favorite one to do the job, unless the warranty company agrees to it.
  • Frustration over the warranty company's decisions - The warranty company decides whether a repair or replacement is appropriate. This can mean that even if your washer keeps breaking down if it's repairable, the warranty company may choose to keep repairing it rather than replace it.

Many homeowners have a home protection plan just for the first year or two they own their home. As with most purchases, before making a final decision, you should ask around to find out the experiences of people in your neighborhood with the different plans available in your area, as well as compare plans regarding cost and coverage.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.