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Whether you are moving into a newly purchased home or have lived on your property for a long time, you may be concerned about the potential expense of fixing major issues with your plumbing, replacing your air conditioning, or repairing an appliance.
For some homeowners, a home warranty can be a good option to help offset some of these costs — as long as you understand the policy’s limitations.
Read more: How much money do I need to buy a house?
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A home warranty functions as a service contract for appliances such as your dishwasher and oven, as well as for systems in your home, including your plumbing, electrical, heating, and air conditioning systems.
A home warranty may cover repairing or replacing your appliance or system, depending on the assessment of the issue when you make a claim. Depending on the terms of your home warranty, you typically pay an annual or monthly fee for the warranty and a service fee when you need to make a claim.
If you have a home warranty and something breaks down, such as your refrigerator, you contact your home warranty provider rather than a repairman. Each home warranty company has a network of service contractors with expertise in different systems and appliances. When you make a claim, the warranty company sends a contractor to your home to inspect the problem and make a recommendation about repairing or possibly replacing parts or even an entire appliance.
Each home warranty company is slightly different, and homeowners often have options for coverage levels — but typically, you will pay a fee for each service call. There also may be other costs because home warranty plans usually have set limits for individual appliance repairs or for an amount you can claim each year.
Learn more: Are home improvements tax deductible?
Each company offers a standard policy with slight differences in home warranty coverage, and most offer various levels of coverage. For example, First Premier Home Warranty offers one plan for certain appliances and systems, another that adds coverage for things like air conditioning and heating, and separate itemized add-ons to your plan.
Some home warranty companies offer special additional coverage (or “add-ons”) for things like a swimming pool or your roof. Some companies won’t cover those features at all, though, so think about your house’s features when comparing warranties.
Generally, most home warranties cover:
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Major appliances such as refrigerators, ovens, stoves, dishwashers, washers, and dryers
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HVAC systems, including air conditioners, furnaces, and heat pumps
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Plumbing systems, including water heaters and toilets
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Electrical systems
Home warranties are meant to provide financial and service support for major systems and appliances, so they don’t typically cover small appliances like a countertop microwave or a standalone air fryer. The coverage helps homeowners cover costs from normal wear and tear, so typically, issues caused by things like natural disasters won’t be covered.
In addition, a home warranty will generally not cover preexisting damage, such as an appliance that hasn’t worked for a long time. During the service assessment at the beginning of a home warranty claim, the contractor will usually evaluate the condition of a broken appliance or system. If there are signs that the item has not been properly maintained or installed, then the claim may be denied.
Home warranties don’t cover the components of the home itself, such as floors, windows, walls, and doors. These policies also don’t usually cover remediation issues such as radon gas or mold.
Read more: What is homeowners insurance, and what does it cover?
Homeowners have a wide range of options when it comes to purchasing a home warranty. Not only do costs vary from one home warranty company to another, but also customers can often choose various levels of coverage within a company. Prices for a home warranty vary by location, home size, and home type — along with service fees — which means you need to request an individualized quote to get an accurate cost estimate.
Here are sample starting home warranty prices from popular companies. (Remember, you’ll pay more for higher-tier plans or any add-ons.)
Home warranty service fees, which are typically charged for each visit a contractor makes to your home, range from around $50 to $125 per visit. If you have multiple service calls in one year, you could spend significantly more on service fees than on the home warranty policy itself. Optional or add-on protection for items such as a swimming pool varies widely depending on the covered item and the coverage limits.
Price is important, of course, but there are other factors to consider when purchasing a home warranty. Some features to compare from one policy to another include:
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What’s covered. Each policy differs, so make sure an appliance or system you think may need future service is covered.
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What’s excluded. Some features, such as a swimming pool or an ice maker, can be added to your coverage for an additional fee, while others are entirely excluded.
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Limits on coverage. Most policies have a maximum coverage limit for repairs on each appliance or system. In addition, the contracts are likely to include information about when a claim may be denied, such as for improper installation or lack of maintenance.
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Service fees. Every company has its own way of handling service fees. It’s common for them to charge a flat fee per service call — for example, one might range from $50 to $125. If you opt for the higher flat service fee, you’ll usually be rewarded with a lower premium.
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Waiting period. Many home warranty companies require a waiting period to start service for a new customer. Check how long the waiting period is with different policies before choosing one.
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Reviews. Online reviews compare the type of service you can expect from a home warranty company and its contractors.
A home warranty can be useful, but unlike homeowners insurance, it isn’t required by your mortgage lender. Warranties aren’t for everyone. Consider some of these alternatives:
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Check for existing warranties on your home systems and appliances. Depending on their age, they may be covered by a manufacturer’s warranty.
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Check your credit card coverage. Some credit cards offer extended protection for purchases made with the card.
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Save for specific anticipated repairs.
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Have an emergency fund available for repairing or replacing an appliance.
Look at the costs of a home warranty policy — from premiums to service fees — and compare those with the expenses of fixing or replacing your items individually. This can help you decide if a home warranty is a good fit.
What’s the difference between a home warranty and homeowners insurance?
A home warranty covers breakage or damage to appliances and systems in your home with a service contract to repair or replace those items. A homeowners insurance policy provides financial protection for your home and possessions if they are damaged or destroyed by specific covered perils such as a fire, theft, or a natural disaster. Also, mortgage lenders typically require you to purchase homeowners insurance, but warranties are optional.
No. Home warranty plans cover general wear and tear to home appliances and other systems per your contract, not the house itself. A homeowners insurance policy covers damage to your home, such as the foundation, windows, doors, or floors, due to a natural disaster or theft.
You are not required to have a home warranty when you sell your home. However, some real estate experts suggest it’s a good idea to have the financial protection and access to contractors while your home is for sale. The home warranty is often transferable to your buyers after completing the transaction.
No. A builder’s warranty is for home constructions or major remodels. Home builders typically offer a warranty of 10 years on major structural defects for your house, such as a roof collapse or a foundation issue. They also typically provide a one-year or two-year warranty on other features in the home, including windows, plumbing, HVAC systems, and electrical systems.
This article was edited by Laura Grace Tarpley.