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If you are considering buying a home, condo or townhouse, then you should know about home warranty plans.

The term Home Warranty is used to describe a variety of products. In some situations, new homebuilders use the term to describe the standard coverage they provide on items in a new home. In other contexts, it is used to describe an insurance policy purchased by a homebuyer or home seller to cover items on a resale home (not new construction).

In this article, we are referring to the later type of policy 'a policy purchased by a homebuyer or home seller for a resale home. In this context, a home warranty is a service contract to maintain or repair, when needed, certain items in a home, condominium or townhouse. This type of warranty is an option for buyers wanting more coverage beyond items normally covered in a homeowner's insurance policy. Home sellers sometimes purchase this type of policy and offer this as an incentive to homebuyers to purchase their home.

If a repair is needed during a covered period for items that are covered, then the homeowner simply contacts the Warranty Company to request service. The Warranty Company will send out a qualified professional to repair the item. The homeowner will usually have to pay a small deductible for a service call, and the warranty company covers the rest.

The home warranty industry is a competitive business and items covered and costs vary from company to company. In general, many home warranty policies cover: plumbing, heating, electrical system, water heater and major appliances, such as range/oven/cooktop, dishwasher, and garbage disposal. Policies are typically issued in one-year intervals, with the option to renew at the end of the year. The cost of a policy varies from $200 per year for a small home, condo or townhouse, up to $1000 or more for large properties with expanded coverage.

So should you get a home warranty? The answer is it depends on the condition and age of the home, your financial situation, and your level of risk tolerance. A warranty may be a good idea if you are buying an older home that is in poor condition. However, if you are buying a newer home in excellent condition, then you may decide that there is less risk.

In making your decision, be sure you carefully evaluate your financial situation and determine if you have the means to pay for a major repair should some costly item in the home need repair or replacement. You should also carefully evaluate your homeowner's insurance policy to determine what items are already covered. A good home inspector can provide you a through evaluation about the condition of a home and it's major systems before you sign a home purchase contract. This information will help you decide on whether or not to purchase a warranty policy.