Buying a home is one of the biggest investments you’ll ever make. While homeowner’s insurance protects your property from unexpected damage, a home warranty covers the cost of repairing or replacing major systems and appliances due to normal wear and tear. But what exactly is a home warranty, and how does it work?
In this guide, we’ll explain everything you need to know about home warranties, including what they cover, how they differ from homeowners’ insurance, and whether they’re worth the cost.
What Is a Home Warranty?
A home warranty is a service contract that helps cover the repair or replacement costs of major home systems and appliances when they break down due to age or regular use. Unlike homeowners’ insurance, which protects against damage from fires, theft, or natural disasters, a home warranty focuses on mechanical failures.
How Does a Home Warranty Work?
Purchase a Plan – You choose a home warranty provider and select a plan that fits your needs.
Pay an Annual or Monthly Fee – Most warranties require a premium, either paid upfront or in installments.
Request Service When Something Breaks Down – If a covered appliance or system fails, you contact your warranty provider.
Pay a Service Fee (Deductible) – A technician is dispatched, and you pay a small service call fee (usually 75−75−125).
Get Repairs or Replacements – The warranty company covers the remaining costs if the issue is covered under your plan.
What Does a Home Warranty Cover?
Home warranty coverage varies by provider, but most plans include:
Appliances
- Refrigerators
- Ovens & Stoves
- Dishwashers
- Washing Machines & Dryers
- Microwaves
Home Systems
- HVAC (Heating & Cooling)
- Electrical Systems
- Plumbing Systems
- Water Heaters
Optional Add-Ons
- Pool & Spa Equipment
- Roof Leak Repairs
- Septic Systems
- Well Pumps
Home Warranty vs. Homeowners Insurance
Many homeowners confuse home warranties with homeowners’ insurance, but they serve different purposes:
| Feature | Home Warranty | Homeowners Insurance |
| Coverage Type | Mechanical breakdowns due to wear & tear | Damage from disasters, theft, or accidents |
| Required? | Optional | Usually required by lenders |
| Cost | 300−300−600/year + service fees | $1,000+/year + deductible |
| Claims Process | Covers repairs/replacements of old systems | Pays for damage restoration |
A home warranty does not replace homeowners’ insurance—it complements it by covering what insurance doesn’t.
Benefits of a Home Warranty
Financial Protection
Unexpected repairs can cost thousands. A home warranty limits out-of-pocket expenses.
Convenience
No need to search for contractors—your warranty company arranges repairs.
Peace of Mind
Knowing that major systems are covered reduces stress for homeowners.
Helpful for Home Sellers & Buyers
Sellers often include a warranty to make their home more attractive, while buyers get protection after moving in.
Are Home Warranties Worth It?
Whether a home warranty is worth it depends on:
The Age of Your Home – Older homes with aging systems benefit more.
Your Emergency Savings – If you can’t afford sudden repairs, a warranty helps.
Appliance Conditions – If your appliances are near the end of their lifespan, coverage is useful.
Potential Drawbacks
- Service Fees Add Up – Multiple claims mean multiple service call fees.
- Coverage Limits – Some plans cap payouts per item.
- Pre-Existing Conditions Not Covered – Warranties don’t cover issues that existed before the policy started.
How to Choose the Best Home Warranty
When selecting a home warranty provider, consider:
✔ Coverage Options – Does the plan include what you need?
✔ Customer Reviews – Check ratings on BBB, Trustpilot, or Google.
✔ Cost & Service Fees – Compare premiums and deductibles.
✔ Claim Process – Are repairs handled quickly?
✔ Contract Terms – Read the fine print for exclusions.
Top Home Warranty Companies in 2024
- American Home Shield – Best for nationwide coverage
- Choice Home Warranty – Affordable plans
- Cinch Home Services – Great customer service
Final Thoughts
A home warranty is a smart investment for homeowners who want to avoid unexpected repair bills. While it’s not a substitute for homeowners’ insurance, it provides valuable protection for appliances and systems that wear out over time.
Before buying, compare plans, read reviews, and assess whether the cost justifies the potential savings. For older homes or homeowners without a large emergency fund, a home warranty can offer significant financial security and convenience.