What does a home warranty cover?

Home warranty basics

People often mix up the terms “warranty” and “insurance.” The two have very different functions:

• A home warranty pays to repair or replace things that stop working over the course of normal use.
• Homeowners insurance pays to cover property damage or liability caused by an accident or catastrophe, like a fire.

Angel Conlin, chief insurance officer at Kin Insurance, used this example: If a tree falls and crashes into your kitchen, your homeowner’s policy can help you replace any damaged appliances. But if your oven range has an aging component fail, the cost to repair and replace it won’t be covered through a home insurance policy. That’s when you call the warranty company.

Home warranty plans are purchased separately from insurance policies. It’s common to get one when you buy a new house, but it can be purchased at any time. You pay an annual premium for the plan, and when a covered item breaks, you pay a service call fee to the warranty provider. Then a technician comes out to replace or repair the item.

» MORE: Home warranty vs. home insurance

What a home warranty covers

Top home warranty providers offer standard coverage for the following systems and/or appliances. Specific coverage ultimately depends on the provider and plan — and the details contained in the fine print in the home warranty contract.

Typical system and appliance coverage

Optional coverage

In addition to systems and appliances, many home warranty providers offer add-on coverage for an extra cost, including coverage for:

• Roof leak repair
• Well pumps
• Sump pumps
• Septic tanks
• Water softeners
• Guest units
• Pool equipment
• Spa equipment

Sometimes the extra (more expensive) coverage can be worth it to help take the hassle out of homeownership.

For example, a reviewer in New Jersey filed a claim because of a small roof leak: “I called to talk to one person, she took down my information, and a contractor was in touch, and the rest is history. There were no hiccups.”

» MORE: Is a home warranty worth it?

Compare home warranty coverage by company

Understanding the scope of coverage and the limitations of a home warranty can help you decide whether it's the right choice for your needs. For instance, American Home Shield covers bathtubs and water dispensers, while Select Home Warranty doesn't.

What a home warranty does not cover

No home warranty plan covers every little thing. Some items, such as sprinklers, fences or (usually) pools, are rarely covered by these plans, although the company may offer optional coverage for them. The terms and conditions of your contract might also exclude certain appliances other providers cover.

Be aware that improper maintenance and other exclusions may limit the coverage. In addition, a home warranty may not cover every component of a system or appliance, and there may be caps on the amount of coverage for each repair or replacement. It also doesn’t cover preexisting conditions — the appliance or system must fail after you purchase the warranty.

Not covered by a home warranty

• Preexisting conditions from before you got coverage
• Items that fail due to something other than normal wear and tear
• Cosmetic issues and nonmechanical components
• Things that were improperly installed or modified
• Anything not specifically mentioned as covered in the terms of your contract
• Any secondary damage caused by an appliance or system failure

Home warranty limitations and exclusions

Sometimes exclusions lead to essentially having no coverage, according to a reviewer in Idaho, who filed a claim when their HVAC stopped working.

The claim was denied. The reviewer told us that “in addition to Freon not being covered by the warranty, that cleaning of the coils was not covered by the warranty, and that labor required to replace the failed comm board was — you guessed it — not covered by the home warranty they sold.”

The reviewer was understandably frustrated: “When everything was said and done, I paid a bill for $1,007.50 from the HVAC repair company.” Considering how much a home warranty costs, it’s really only worth it if the company makes good on its claims.

This is why it’s important to understand your contract before you buy a plan.

» MORE: What is a home warranty?

Choosing a home warranty

Taking the time to research and compare different companies can help you choose the best home warranty for your home and budget.

Look at factors like the company's reputation, coverage options and pricing. Pick a company with a good track record of customer service and timely repairs. Make sure the coverage options align with your needs, and compare coverage limits and deductibles to ensure you're getting a fair value.

Bottom line

A home warranty can help cover the costs of fixing expensive and unpredictable household problems, like a busted air conditioner or broken water heater. Most people get one for financial protection against unexpected expenses when a covered item fails.

One of the most common questions about home warranties is what’s covered. Most home service contracts cover dishwashers, ovens, wiring and plumbing systems and heating, ventilation and air conditioning systems and similar items, according to the National Home Service Contract Association.

Before you buy a plan, it’s essential to read the fine print of a home warranty contract. Specifically, look at the different levels of coverage, contract details, exclusions and limits. For example, some companies specify that they have the right to ask for maintenance records, so you want to make sure you keep these on hand.

» MORE: Annual home maintenance checklist