Does a First-Time Buyer Need a Home Warranty?

Written by Rachel Vega
Updated June 15, 2016
Should a first-time home buyer purchase a home warranty? Before you decide, be sure to do your homework. (Photo courtesy of Angie's List member Nate H.)

A home warranty can offer you peace of mind, especially as a novice home buyer.

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If you're a first-time home buyer wondering whether to invest in a home warranty, here are some things to consider:

Do your homework

A home warranty is not the same as homeowners insurance.

Insurance covers major situations such as fire, storm damage and some water damage. A home warranty is a contract between you and the warranty company. It offers discounted rates for repair and replacement on certain items in your home. Often, it will cover the furnace, air conditioner, and electrical and plumbing systems. Some plans also cover the washer and dryer, refrigerator and swimming pools.

A good home warranty will cover most issues, big and small, that can occur with these items. Do your research because every home warranty company offers different plans that cover different items.

Cost of a home warranty

Home warranties only cost a few hundred dollars a year. For most companies this is paid up front, but others offer payment plans so you can pay off your balance in installments. The costs will vary depending on what type of policy you're buying.

Contrary to what many homeowners believe, the costs are not determined by the age of the home or square footage, they're determined by the type of policy and what's included in the coverage.

After paying the yearly premium, you'll also be charged for service calls by most companies. This cost varies, but it's usually around $60 to $100 for someone to come and investigate a possible problem. Depending on the problem and the number of workers needed, you may need to pay a service fee for each worker.

Pros and cons of a home warranty

Pros include:

• A home warranty is a good idea when a home is five years or older, which is when some repair issues may start to appear.

• Peace of mind because if you experience a problem, repair or replacement costs will be discounted.

Cons include:

• A home warranty won't cover anything that hasn't been properly maintained, whether by you or a previous homeowner. This can cause disputes on whether or not a repair should be covered.

• It's possible you can pay premiums for several years and never have a claim.

Before you decide to buy a home warranty, be sure to read through a contract and ask questions about what it takes to have a successful claim. Also, keep in mind that if it's a difficult selling market, you may be able to get the home seller to pay the cost of a warranty for the first year.

Editor's note: This is an updated version of an article originally posted on October 19, 2012.

Do you have a home warranty? Share your experience with us in the comments section below.


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