What Does a Home Warranty Cover?

What is a home warranty?

A home warranty is a service contract that helps homeowners cover the cost of repairing or replacing major home systems and appliances that fail due to normal wear and tear. Unlike homeowners insurance, which protects against unexpected events like fires or natural disasters, a home warranty offers peace of mind by reducing the out-of-pocket expense of routine breakdowns.

How does a home warranty work?

When a covered item in your home breaks down, you file a claim with your home warranty provider. The provider then dispatches a licensed service technician to diagnose the issue. After verifying the problem falls within the coverage terms, the technician completes the repair or replacement. You typically pay a service call fee, which varies by provider and plan. If the cost of repair or replacement exceeds the coverage cap, you're responsible for the difference.

What a home warranty covers

Top home warranty providers offer standard coverage for the following systems and appliances. Specific coverage ultimately depends on the provider and plan — and the details contained in the fine print in the home warranty contract. You may find that some companies have a systems-only or appliances-only plan, along with a comprehensive third package. Others may offer a variety of comprehensive plans.

Typical system and appliance coverage

Systems

• Electrical
• Heating
• Plumbing
• Air conditioning
• Water heater
• Ductwork
• Ceiling fans
• Instant water dispenser

Appliances

• Dishwasher
• Oven, range and cooktop
• Built-in microwave
• Trash compactor
• Garbage disposal
• Clothes washer and dryer
• Garage door openers
• Refrigerator (sometimes optional)

Optional coverage

In addition to systems and appliances, many home warranty providers offer add-on coverage for an extra cost. Coverage for these items can be purchased a la carte, so you can easily customize your plan. You can typically find coverage for the following items:

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

While not as common, some companies offer maintenance services, such as a yearly HVAC tuneup or pest control. For new homeowners, it may be worth it to add rekey services. You can also find providers with electronic plans to protect TVs, laptops, home theater systems and video game consoles.

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

For example, a reviewer in Delaware 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 home warranties don’t cover

No home warranty plan covers every little thing. Some items, such as sprinklers, fences or garage doors, are rarely covered by these plans. In general, you won’t find coverage for structural items, like your home’s foundation. For instance, if a toilet leaks, the warranty provider will probably pay for the leak, but the company won’t pay to fix the surrounding damaged floor.

Providers may deny coverage if items aren’t properly maintained. Get annual tuneups for major systems, and keep records handy.

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 known 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
• Items 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

Even when appliances and systems are covered, not every component or problem may be covered. For example, a fuel tank won’t be covered along with your heating system, or jets and liners will be excluded from pool coverage.

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. Always read the entire agreement so you’re not caught offguard, and ask your provider questions to clarify.

» MORE: What is a home warranty?

How much do home warranties cost?

On average, home warranties cost between $350 and $900 per year. This comes down to about $30 to $90 a month.

In addition to monthly costs, you’ll also need to factor in the service fee, or deductible. Service call fees typically range from $75 to $150 each time you request a technician. Some companies will let you choose the service fee — choosing a higher fee will often lower your monthly premium.

Home warranty vs. homeowners insurance

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

• A home warranty pays to repair or replace items 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, uses 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; 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

How to choose 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.

Some of the most important factors to consider include:

• Coverage needs: Every homeowner’s needs are different, so you’ll first need to think about what systems and appliances need to be covered. Start with items that are no longer under the manufacturer’s warranty. If anything is also reaching the midway point in its average life span, you’ll probably want coverage. Older systems and appliances are more likely to break down.
• Pricing: Once you know what items you want in the plan, you can start comparing quotes. Don’t forget to factor in the cost of service fees and any caps on coverage limits. A low monthly price won’t mean much if the company also has a low coverage cap. Then you’ll be stuck paying the difference.
• Reputation: Pick a company with a good track record of customer service and timely repairs. Take a look at reviews on our website to get a better sense of the company’s reputation. Does the company often deny claims? Does it send out experienced contractors?

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, plumbing systems, HVAC 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