A home warranty is a service contract that covers repair or replacement of major home systems and appliances when they fail due to normal wear and tear. Annual premiums range from $300-$600 with service call fees of $75-$150. Home warranties are different from homeowners insurance—insurance covers damage from events like fire or storms, while warranties cover mechanical failures. Sellers often provide a warranty to buyers as part of the sale.
What Is a Home Warranty?
The Basic Concept
A home warranty:
- Covers repair or replacement costs
- For covered systems and appliances
- When they fail from normal use
- For an annual premium plus service fees
Home Warranty vs Homeowners Insurance
| Feature | Home Warranty | Homeowners Insurance |
|---|---|---|
| Covers | Mechanical failures | Damage from events |
| Examples | AC breaks down, washer fails | Fire, theft, storm damage |
| Premium | $300-$600/year | $1,000-$3,000/year |
| Deductible | $75-$150 per service call | $500-$2,500 |
| Required? | No | Yes (by lender) |
For more on insurance requirements, see our homeowners insurance guide.
What Home Warranties Cover
Systems Coverage
| System | Typically Covered |
|---|---|
| HVAC | Heating and cooling systems |
| Electrical | Wiring, panels, switches |
| Plumbing | Pipes, fixtures, water heater |
| Ductwork | Air ducts |
| Garage door opener | Mechanical components |
| Ceiling fans | Motor and components |
Appliance Coverage
| Appliance | Typically Covered |
|---|---|
| Refrigerator | Yes |
| Dishwasher | Yes |
| Oven/range | Yes |
| Microwave (built-in) | Yes |
| Washer/dryer | Yes |
| Garbage disposal | Yes |
Optional Add-Ons
| Item | Available as Add-On |
|---|---|
| Pool/spa | Yes |
| Septic system | Yes |
| Well pump | Yes |
| Second refrigerator | Yes |
| Guest unit | Yes |
What’s NOT Covered
Common Exclusions
Pre-existing conditions:
- Problems that existed before coverage started
- Issues found in home inspection
- Known defects
Improper installation:
- Items not installed to code
- DIY installations gone wrong
- Improper modifications
Lack of maintenance:
- Failure due to neglect
- Not changing filters
- Ignoring warning signs
Cosmetic issues:
- Scratches, dents
- Appearance problems
- Non-functional issues
Specific Exclusions Often Include
- Outdoor faucets
- Sprinkler systems (unless added)
- Structural components
- Windows and doors
- Permits and code upgrades
- Hazardous materials removal
How Home Warranties Work
Step 1: Purchase Coverage
- Choose a plan and add-ons
- Pay annual premium (or monthly)
- Coverage begins after waiting period (usually 30 days)
Step 2: Something Breaks
- System or appliance fails
- Must be covered item
- Must be normal wear and tear
Step 3: File a Claim
- Contact warranty company
- Describe the problem
- Get claim number
Step 4: Service Visit
- Company sends contractor
- You pay service fee ($75-$150)
- Contractor diagnoses problem
Step 5: Repair or Replace
- If covered, company pays for repair/replacement
- You pay nothing beyond service fee
- If not covered, you pay full cost
Home Warranty Costs
Annual Premiums
| Plan Type | Typical Cost |
|---|---|
| Basic systems | $300-$400 |
| Systems + appliances | $400-$600 |
| Complete | $500-$700 |
| With add-ons | $600-$900 |
Service Call Fees
| Fee Level | Cost |
|---|---|
| Low | $75 |
| Standard | $100 |
| Higher | $125-$150 |
Lower service fee = higher annual premium (and vice versa)
First-Year Costs Example
$500 premium, $100 service fee:
- No claims: $500 total
- 1 claim: $600 total
- 3 claims: $800 total
Is a Home Warranty Worth It?
When It May Be Worth It
Older home:
- Systems and appliances near end of life
- Higher likelihood of failures
- Replacement costs are high
Older appliances:
- Out of manufacturer warranty
- Unknown maintenance history
- Could fail anytime
Peace of mind:
- Budget protection
- Predictable costs
- Less stress about repairs
New homeowner:
- Unfamiliar with home’s systems
- Don’t know maintenance history
- Learning curve
When It May Not Be Worth It
New construction:
- Builder warranty covers defects
- New appliances have manufacturer warranties
- Low failure probability
Handy homeowner:
- Can do repairs yourself
- Have contractor relationships
- Prefer to manage repairs
High service fees:
- Multiple $150 service calls add up
- May approach repair cost anyway
Negative reviews:
- Company has poor claim history
- Contractors are subpar
- Too many denials
Pros and Cons
Advantages
| Pro | Explanation |
|---|---|
| Budget protection | No surprise repair bills |
| Convenience | One call for service |
| Coverage for old items | When manufacturer warranty expired |
| Negotiation tool | Sellers use to close deals |
Disadvantages
| Con | Explanation |
|---|---|
| Limited coverage | Many exclusions |
| Claim denials | ”Pre-existing” or “maintenance” issues |
| Contractor quality | You don’t choose who comes |
| Service fees add up | $100+ each time |
| Caps on payouts | May not cover full replacement |
Home Warranties When Buying
Seller-Provided Warranty
Common practice:
- Seller pays for first year
- Included in purchase agreement
- Covers during listing and after close
Benefits:
- No cost to buyer
- Protection during first year
- Seller shows confidence in home
Negotiating a Warranty
If seller doesn’t offer:
- Ask for it in negotiations
- Relatively small concession
- Often granted
During Listing Period
Seller benefits:
- Covers repairs while listed
- Reduces negotiation over issues
- Smoother transaction
Choosing a Home Warranty Company
What to Compare
| Factor | What to Look For |
|---|---|
| Coverage | What’s included vs excluded |
| Premium | Annual cost |
| Service fee | Per-call cost |
| Caps | Maximum payout limits |
| Reviews | Customer satisfaction |
| Contractor network | Quality of service providers |
Red Flags
Warning signs:
- Many claim denials in reviews
- Poor customer service ratings
- Contractors don’t show up
- Long wait times for service
- Hidden exclusions
Top Considerations
- Coverage limits: What’s the max they’ll pay per item?
- Exclusions: Read the fine print
- Contractor quality: Check reviews about service
- Claims process: How easy to file and get service?
- Company reputation: How long in business?
Filing a Claim Successfully
Tips for Approval
Document everything:
- Keep maintenance records
- Save repair receipts
- Photograph issues
Know your coverage:
- Read policy carefully
- Understand exclusions
- Know what’s covered
File promptly:
- Don’t delay when issues occur
- Follow claim procedures exactly
- Get claim number in writing
If Claim Is Denied
Steps to take:
- Request denial in writing
- Review policy language
- Gather supporting evidence
- Appeal the decision
- Escalate to supervisor
- File complaint with state if needed
Alternatives to Home Warranties
Self-Insurance
Set aside money monthly:
- Put warranty premium cost in savings
- Build repair fund
- Use when needed
Pros:
- Money is yours
- No claim denials
- No service fees
Cons:
- Early failure before fund builds
- Discipline required
- No contractor network
Appliance Extended Warranties
Buy warranty on specific items:
- Only for expensive items
- Often from manufacturer
- May have better coverage
Home Maintenance Plans
From contractors:
- HVAC tune-ups
- Plumbing inspections
- Electrical checks
Prevents problems rather than fixing them.
Frequently Asked Questions
What does a home warranty cover?
Typically covers major home systems (HVAC, electrical, plumbing) and appliances (refrigerator, washer, dryer, oven) when they fail due to normal wear and tear. Specific coverage varies by plan.
How much does a home warranty cost?
Annual premiums range from $300-$600 depending on coverage level. Service call fees range from $75-$150 per visit.
Is a home warranty worth it for a new home?
Usually not for brand-new construction, which has builder warranties and new appliances with manufacturer warranties. More valuable for older homes with aging systems.
Who pays for the home warranty?
In a sale, often the seller pays for the first year as a negotiating tool. After that, the homeowner decides whether to renew.
What’s the difference between home warranty and homeowners insurance?
Home warranty covers mechanical failures (AC breaks down). Homeowners insurance covers damage from events (fire, storm). Both are different types of protection.
Can a claim be denied?
Yes. Common denial reasons include pre-existing conditions, lack of maintenance, improper installation and items not covered by the policy.
How do I file a home warranty claim?
Contact your warranty company (phone or online), describe the problem, receive a claim number, then a contractor is dispatched. You pay the service fee when they arrive.
Can I choose my own contractor?
Usually no. The warranty company sends contractors from their network. This is a common complaint, as you can’t select your preferred service provider.
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Lisa Rodriguez
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