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What Is A Home Warranty & Do You Need It?

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What is a home warranty and do you need one?

Homebuyers need to be aware of what a home warranty is, and what it is not. For example, the word ‘warranty’ may be misleading as it’s a ‘promise’, not a guaranty and not all home warranties are the same. However, knowing what the home warranty is and how it works can offer homebuyers peace of mind.

In general terms, a home warranty provides a sense of protection for the homeowner that repairs and when required, full replacements are covered or at the very least discounted on systems in the home. Plumbing, heating, electrical can be expensive to repair. The appliances like the refrigerator, and dishwasher can also set you back. A new homeowner has likely maxed out their borrowing capacity to purchase the home, so the last thing they need is a significant repair or replacement invoice. Imagine how stressed the homeowner would be too if more than one incident coincided and with no option to put off the repair, somehow the bills need to be paid once the repairs have been done.

When Is A Home Warranty Required?

Building and household insurance typically cover you for the building and contents but not the systems and not appliances as mentioned above. Hence the home warranty is a necessity if the building inspection that you had carried out before you purchased the home revealed older wiring, plumbing that’s likely to incur high maintenance costs. If your dishwasher, washing machine etc. are under product warranties, then you’re not expected to need the additional home warranty.

Typically the older the home, the higher the likelihood of costly systems failures. We all know how expensive plumbing and electrics can be to replace so what you’re doing with a home warranty is buying peace of mind that you’re going to get a better deal when the unforeseen occurs in your home.

Why Would A Seller Buy The Home Warranty?

Often sellers will market their property listing with a home warranty, and this strategy has proven successful for securing a sale for hard to sell older properties. However, this is a ‘caveat emptor’ moment for the homebuyer as not all home warranties are considered equal. As with the insurance industry, selling the warranties is a competitive environment. The issuer usually incentivizes sellers. For example, one incentive is to pay for the costs of the property listing.

Selling a home always incurs marketing and listing costs so as you have to pay for it, why not get it for free and include the warranty which is likely to be of similar cost. The cheapest home warranty is not always the best, so it’s important for the homebuyer to analyze the warranty and if it offers the assurance they need. It’s not just the sellers who will get the warranty sometimes the listing agent will buy it.

When Do Agents Buy It?

If the seller is not willing to add a home warranty in the deal, the real estate agent may include one from his or her side to improve the odds of closing the deal.

Many agents buy a warranty for their buyers as a closing gift and a good gesture to get word-of-mouth publicity in the buyer’s circle. This action usually happens when the seller does not offer a warranty, but the buyer seeks one. If the buyer does not have a preference for the companies, the agent may offer to purchase the warranty. Agents generally look for excellent warranty plans with reputed customer support, as they do not intend on ruining their reputation just to buy the best home warranty and close the deal.

Purchaser Can Renew Or Buy Another Warranty

Even if the agent or the seller gives a complimentary warranty with the purchase, eventually, the buyer has to renew the warranty. So buyers purchase the home warranty in two possible scenarios:

  • To renew the warranty given by the seller or agent while purchasing the home
  • To buy a warranty while purchasing a home, if the agent or the seller is not providing it

In such a scenario, the buyer gets the freedom to choose a suitable home warranty company and an affordable plan as per his or her budget so they can pay for it. Here, you would be looking for the cheapest home warranty plans offering the bests of the protections.


Whether you are getting the warranty as bundled or purchasing it by yourself, you know how much it costs to purchase one. The cost depends on the extent of coverage and certain discount campaigns run by home warranty companies from time to time. The cheapest home warranty plan may range between $350 -$600 / year. The price might go up as you increase the benefits and coverage.

Depending on a company’s policies, you may also get a payment plan in equal instalments. Be advised that the cost of the plan vary as per the property types such as single-family detached, apartment, villa, condominium, townhouse, or a duplex.


Apart from the warranty cost, some warranty companies also charge service call fees, typically $100-$125 per service. If your breakdown requires more than one person to visit your place, you may have to pay a separate service call fee to each.


Home warranties provide value to homeowners where there are no existing product or systems warranties in place. Home sellers are incentivized to use them, and sometimes it may be the listing agent that purchases it as part of their agreement with the vendor (seller). As the new homeowner do your research to find the real value in the home warranty.