All About Home Warranties
Not to be confused with homeowner’s insurance, which covers the structure and contents of your home, a warranty service contract is designed to cover systems and appliances that stop working due to normal usage. Basic coverage generally includes the repair and replacement of major appliances such as heating/cooling system, water 
heater, refrigerator, dishwasher, stove, etc. Plumbing and electrical systems are also usually covered, and some companies include washer, drier, microwave, and roof maintenance in the basic tier.
Gaining in popularity with both buyers and sellers, warranty service contracts serve to reassure owners that they won’t face major repair/replacement costs. Sellers use them to protect the home while it’s on the market and as an incentive to attract buyers. Buyers rely on them to protect them from unexpected and expensive repairs. Even Freddie Mac will offer a $500 home warranty credit to home buyers who purchase a qualified, foreclosed single-family home, townhouse, or condominium through their HomeSteps® division.
A warranty plan is fairly inexpensive, typically ranging from $250 to $400, depending on coverage. The policy is prepaid for a year in advance, at which time it expires or can be renewed. The usual procedure for service needs is as follows:
- If a home system or appliance breaks or stops working, the home owner calls the home warranty company.
- The home warranty company calls a provider with which it has a business arrangement.
- The specific provider calls the home owner to make an appointment.
- The provider fixes the problem. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance.
- The home owner pays a small trade service fee (less than $100) for each service call.
Most home warranty companies offer a variety of plans, each providing different levels of coverage, so be sure to read the details of any contract before buying. If you choose to renew the contract from year-to-year, double-check the details of your plan each time since coverage can change annually.
According to the Service Contract Industry Council, 32 states require home warranty companies to register or obtain a license with that state's department of insurance and comply with applicable laws and financial standards. Membership lists are available at their website.
Information provided by Wilmington DE Realtor Tucker Robbins.
