Many different real estate terms cause confusion because they sound like they are talking about the same thing, but in reality are talking about very different things. Home warranties and homeowner’s insurance are two of those things. They both provide protection for you and your home, but in very different ways.
Home Warranties
A home warranty is a policy generally purchased by the seller prior to or at closing, though a buyer could purchase one as well. It covers the major systems and appliances of a home and repairs or replaces them when they break during the coverage period. The definitions of major systems and appliances vary from policy to policy, but they typically entail heating and air, plumbing, electrical, hot water heaters, dishwashers, stoves/ovens and garage door openers. If the refrigerator was in the home when it was purchased or before the policy went into effect, it is covered as well.
Function
Home warranties are optional, but many sellers purchase them as reassurance for buyers that any repairs or replacement of worn components in the home will not come out of their pocket. This is especially valuable in areas where resale homes are in strong competition with new homes, since the out-of-pocket maintenance cost for a resale will be the same as for a new home. Home warranty companies keep a set group of trusted…
By SFGate.com
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