Do I Need A Home Warranty On New Construction?

When buying a home, there are many levels of protection, such as inspections, appraisals, warranties and insurance. Unfortunately, remembering the difference between them can get a bit confusing.

Home inspections are performed by unbiased third parties to identify severe defects in the major systems and components of the home. As a result, they protect buyers from purchasing a home with significant defects.

On the other hand, appraisals protect the bank from loaning too much money for a property. Instead, a private appraiser will evaluate the property and market factors to determine a fair market value.

Home insurance protects the homeowner from financial loss in a natural disaster or accident. For example, if there’s a house fire, insurance would provide coverage for repairs, personal property and sometimes hotel fees. However, home insurance does not cover damage to mechanicals and appliances from normal wear and tear.

That is where home warranties come in. The best home warranty companies cover the home’s mechanicals and appliances that fail from normal wear and tear. So, for example, a home warranty would cover the water heater if it suddenly stopped working.

However, homeowner’s insurance would cover if a tree fell through the roof and damaged the water heater.

In exchange for this, the homeowner pays the warranty company a monthly or annual premium and a deductible whenever they make a service call.