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As home appliances and systems age, costly breakdowns and repairs become more likely. A failing AC unit or faulty wiring can cause a financial blow, especially when unexpected. Finding the right professional and paying for service or replacement only add to the headache.
This is where home warranties come in handy. Home warranties protect homeowners from unpredictable expenses by covering repairs and replacements for items like air conditioning, plumbing and electrical systems. In this guide, we’ll explore home warranties, how they work and what they typically cover (and don’t).
What is a home warranty?
A home warranty is a service contract that covers the cost to repair or replace major home systems and appliances that break down due to normal wear and tear. It’s designed to give homeowners peace of mind and financial protection from expensive breakdowns. Unlike homeowners insurance, which covers damage to your home’s structure from unexpected events, such as fires or storms, a home warranty covers breakdowns of items like your electrical system or kitchen appliances.
When a covered item stops working, the home warranty company pays for the repair or replacement — up to a set limit. In exchange, policyholders pay a monthly or annual premium, a per-incident service fee and the difference in repair costs if they exceed the warranty plan limit.
It’s worth noting that coverage limits vary significantly by company and might be per annual contract, per item or for a set of items. For example, 2-10 Home Warranty caps coverage for refrigerators at $2,500 and coverage for dishwashers at $500. The Home Service Club, on the other hand, will pay up to $750 per year for all plumbing repairs and up to $2,000 per year for combined HVAC repairs and replacements.
What’s covered by a home warranty?
Most reputable home warranty plans include major home systems and expensive appliances prone to breaking down.
Systems
Major systems you can expect a home warranty to cover include:
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Ductwork
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Electrical
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Heating, ventilation and air conditioning (HVAC)
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Plumbing
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Recirculating hot water pump
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Smoke detector(s)
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Water heater
Of these, HVAC and plumbing tend to be most prone to breakdowns.
HVAC systems work tirelessly day and night to maintain comfortable temperatures, leading to wear and tear over time. According to Angi’s 2023 study data, the average cost to replace an AC unit is between $3,884 and $7,931. It’s these types of costly repairs that a home warranty can offset.
Homeowners also use plumbing daily, resulting in leaks, clogged drains and other costly problems. Home Advisor indicates that plumbing issues run an average of $334 to resolve.
Appliances
A standard home warranty often covers the following appliances:
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Attic and exhaust fans
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Dishwasher
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Garage door opener
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Garbage disposal
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Microwave oven
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Oven/range
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Refrigerator
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Washer and dryer
Homeowners use their kitchen and laundry appliances daily, increasing the odds of eventual breakdowns. Refrigerators also become problematic as seals wear out over time. Garage door openers can fail due to mechanical and electrical issues.
Common add-ons
Many home warranty companies allow you to customize and enhance your coverage through add-ons for an extra fee. Common add-ons include:
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Central vacuums
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Combo ceiling fans
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Faucets
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Guest houses under 750 square feet
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Home electronics like TVs and computers
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Ice makers
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Outdoor water systems
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Pools, hot tubs and spa equipment
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Roofing
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Secondary refrigerators
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Septic systems
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Sprinkler systems
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Stand-alone freezers
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Well pumps
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Wine coolers
What’s not covered by a home warranty?
While basic home warranties cover many major systems and appliances, there are exclusions. For example, cosmetic issues like chipped appliances or faded finishes aren’t covered. Most home warranty plans also exclude regular maintenance, such as cleaning ducts or changing AC filters. Finally, most policies won’t cover issues that existed before the warranty started.
As Shmuel Shayowitz, president and chief lending officer at licensed mortgage bank Approved Funding, explained, “Older systems and appliances might have limited coverage due to wear and tear.”
Other exclusions include:
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Acts of God
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Cosmetic defects
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Environmental damages
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Preexisting conditions
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Regular maintenance
Reading your home warranty contract carefully is the best way to discover what is and isn’t covered. Check your policy’s annual limit and ask your home warranty provider about exclusions. Clarity on exclusions will prevent frustration when you need to file a claim later.
Home warranties vs. homeowners insurance
Home warranties and homeowners insurance provide different protections for your home.
Home warranties cover daily-use problems with systems and appliances. Suppose your HVAC breaks down or an appliance malfunctions — your home warranty would cover the replacement or repair cost. In contrast, homeowners insurance provides financial protection against damage from unexpected events such as fires, storms, thefts and more.
Angel Conlin, Chief Insurance Officer at Chicago-based home insurance company Kin Insurance, breaks down three primary types of homeowners insurance protections:
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Property coverage for your home’s physical structure(s), like a garage
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Personal property coverage (anything inside the home)
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Liability coverage (kicks in if someone gets injured in your home)
Here are examples of what’s covered by home warranty vs. homeowners insurance:
Your home warranty and homeowners insurance work together to provide complete protection against sudden damages and predictable breakdowns.
How does a home warranty work?
A home warranty is an easy way for homeowners to access repair and replacement coverage for covered items. Using a home warranty takes the hassle out of repairs because you don’t have to find repair technicians, negotiate prices or front repair costs. The warranty company’s experts handle everything from diagnosis to repairs.
What to do when something breaks
When a covered system or appliance breaks down, call or go online to file a claim. Depending on your plan, you’ll pay a service call fee — anywhere from $75 to $150. Then, the warranty company will dispatch one of their approved repair technicians to diagnose the problem.
If your warranty covers the issue, the company pays the repair or replacement costs directly to the technician, and you pay only the service fee. Covered costs include parts, labor and additional diagnostic fees needed to fix the issue.
Jenn Newman, a realtor at Arizona-based real estate company The Brokery, advises contacting your home warranty company as soon as something breaks, even if hiring someone yourself would be quicker. Seeking independent help may backfire: “If you try to file a claim afterward, you’ll most likely get denied,” she said.
When does coverage begin?
Coverage typically begins 30 days after your enrollment date. The policy won’t cover preexisting conditions or any breakdowns during this waiting period.
How long does coverage last?
An annual home warranty policy lasts 12 months from the effective date. You can renew your policy each year to extend coverage. Many companies offer discounts for renewals, so it doesn’t hurt to ask. Some providers offer longer two- or three-year initial policy terms at discounted prices.
What does a home warranty cost?
The average annual cost for a home warranty is $660, depending on your location, coverage and provider. Comprehensive coverage could go up to around $1,500. In addition to the annual home warranty fee, homeowners also pay a service fee of $75 to $150 per claim.
Bottom line
A home warranty offers valuable protection against expensive home systems and appliance breakdowns. While coverage varies, warranties generally cover major items like HVAC, kitchen appliances and plumbing that homeowners repair or replace regularly.
Experts suggest investing in a home warranty if:
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You have expensive appliances.
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You don’t want to make repairs on your own.
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You don’t want to deal with hiring a contractor.
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You have limited savings for repairs or replacements.
The annual fees are affordable compared to paying hundreds or thousands out of pocket for a single appliance repair or replacement. The warranty can pay for itself in the first year with just one or two covered repairs.
Frequently asked questions (FAQs)
Note: The prices above reflect the retailers’ listed price at the time of publication.
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