What is covered in a home warranty?

Home warranties have become increasingly popular over the last few years. It is estimated that one in five homes in America are now sold with a home warranty - while in California around 90% of existing homes are sold with a one year warranty. Research indicates that a home covered by a home warranty will sell more quickly - and sell for a higher price.

Home warranties are not a new product - they have actually been around since the 1970s. They were first made popular by real estate companies that offered them to promote their listings service - today, they are still popular with not only realtors, but home buyers and home sellers.

A home warranty is a type of insurance policy designed to cover the cost of repairs or replacement of major appliances and systems - these generally include such things as the home's electrical system, plumbing and water heater. The policy may also cover the large appliances in your kitchen - range, fridge and dishwasher. Some warranties also include such things as roofing, water softeners, ductwork and septic tanks.

The typical home warranty costs, on average, between $350 and $600 per year - the cost depends on what exactly is covered under the plan. A home warranty is well worth the money when compared to the high cost of repairing or replacing your home's major appliances. A warranty also covers the cost of replacement parts, even on older appliances - a big advantage if you own older appliances for which it may be difficult to find parts.

Most home warranties are valid for a year and can easily be extended for another year. There's also a charge for service callout - typically this is around $50. Keep in mind that if you call a repairman out to your house anyway, there's usually a charge just for the visit and before any work is done.

For an extra charge, you can also purchase a more comprehensive home warranty that covers additional appliances and systems in your home. The warranty can cover such things as ceiling fans, garbage disposal unit, garage door opener - and even the front doorbell. These policies with "extras" included tend to cost from $100 to $150 more - and for those of us who don't have the time or just aren't mechanically inclined, they can be a good value.

If you are considering a home warranty, the age of your home doesn't matter. Almost any home may be covered by a warranty - regardless of the home's age or the age of the appliances. However, the size of your home may make a difference - most home warranties generally cover a home that's less than 5,000 square feet in size. Also, if you live in - or are thinking of buying - a home that's over 5,000 square feet, a warranty is usually available for an extra fee.

And you don't have to live in a huge or expensive home - home warranties are also available to those who live in an apartment, townhouse or mobile home. Keep in mind that if you own a smaller home, systems such as the heating and air are less complex and therefore less expensive to repair.

Whereas a home warranty can be useful and cost-effective, there are some things that it doesn't cover. It doesn't generally cover such things as outdoor items, such as spas or swimming pools. If you need to have an item removed from your home, the warranty probably won't cover the removal cost.

And not all warranties cover your fridge or washer/dryer - if these appliances are fairly new and covered under the manufacturer's warranty, you don't necessarily need them covered under the home warranty. Never assume that something is included or not included - always read the small print or contact the warranty company.

A home warranty doesn't cover such things as termites, flooding or subsidence. And a home warranty doesn't cover the cost of major structural repairs on your home, or any damage caused by fire. Most warranties contain exceptions - the warranty company may refuse to pay if they suspect an appliance has been improperly maintained or installed or there have been code violations.

A home warranty can complement your homeowners' insurance but it shouldn't replace it. Many of the things covered under a home warranty plan are not covered by your homeowners' insurance and vice versa.

If you're a seller, a home warranty can be a great selling feature - especially if you are competing with similar houses. And if you're a buyer, a home warranty gives you extra peace of mind, convenience and financial security.

Craig Elliott is a freelance writer frequently writing about home warranty | home warranties