How to Buy a Home Warranty

How to buy a home warranty

If you think a home warranty makes sense for you, it’s important to make the best buying decision you can. The home warranty industry isn’t free of scammers, so be sure to follow these steps.

1. Start by researching reputable warranty providers. “Look for companies with a solid track record, positive customer reviews, and a variety of coverage options,” said housing industry veteran Allia Virtudazo. It's important to understand what specific items are covered under each plan, as these can vary widely.”
2. Narrow things down to your best few home warranty options, then ask for a sample copy of each policy you’re considering. Read through it carefully to determine exactly what it covers. “Pay close attention to coverage limits, deductibles, and any exclusions listed in the contract,” suggests Virtudazo.
3. Get in touch with your top choice once you’ve narrowed your options down. Ask the home warranty provider how the claims process works, along with any other questions you have. “Be sure to ask about the cost of the plan, as prices can vary, depending on the level of coverage you choose and the location of your home,” Virtudazo suggests.
4. Choose a home warranty plan and sign the contract given to you by your new provider and pay the monthly or yearly fee. Be sure you’re clear on exactly when your new coverage starts, since getting this wrong could have serious financial ramifications.
5. “Keep a copy of the contract for your records, and don't hesitate to contact the provider if you have any questions or need assistance during the coverage period,” Virtudazo recommends. “They should be able to explain the coverage in detail and give you a clear overview of the claims process.”

» COMPARE: The best home warranty companies

How does a home warranty work?

Home warranties cover the repair of damaged electrical systems, heating and cooling systems, plumbing, certain appliances and ductwork.

Some states require that all new home sales include a warranty. This protects you from the cost of repairing unforeseen building defects.

Home warranties don’t typically cover household damage caused by fires, vandalism, or natural disasters. These issues are usually the territory of home insurance policies. Your home warranty provider also likely won’t help with damage in your home caused by misuse, intentional destruction, or failure to perform proper maintenance.

Providers often have online claim forms to fill out and submit, along with a phone number if you’d rather speak with a person. Once the claim is filed, the warranty provider will contact its preferred tradesperson, company or appliance manufacturer, depending on the nature of the damage, and get the wheels turning on the repair or replacement.

A home warranty works by providing coverage for specific systems and appliances in your home that may need repair or replacement due to normal wear and tear. Here’s how the process of filing a claim typically works:

1. Identify an issue. When a covered appliance or system fails, you contact your home warranty provider as soon as possible.
2. File a claim. This can usually be done online or over the phone. You’ll need to describe the problem in detail.
3. Service request assigned. The provider will arrange for a vetted contractor or technician to visit your home to assess and repair the issue.
4. Pay the service fee. You’ll pay a predetermined service call fee, which is outlined in your contract.
5. Repair or replacement. The technician will repair the problem or, if necessary and covered by your policy, replace the item.

If your claim is denied, take these steps:

• Review the denial reason. Your provider should explain why the claim wasn’t approved.
• Check your contract. Compare the denial reason against your coverage terms.
• Appeal if appropriate. If you believe the denial was in error, contact the provider to dispute the decision and provide any supporting documentation.

Home warranty vs. home insurance

While both products offer financial protection for homeowners, they serve different purposes. A home warranty covers the cost of repairing or replacing household systems and appliances that break down due to normal wear and tear. Home insurance, on the other hand, protects against damage or loss caused by unexpected events such as fires, storms, theft or vandalism. A home warranty can complement home insurance, but it’s not a substitute. Many homeowners carry both a home warranty and home insurance to ensure broader coverage.

What does a home warranty cover?

Although home warranty coverage can be very different from one policy to the next, generally home warranties cover repair of most household systems and appliances. Here’s what you should expect a good home warranty policy to cover:

• Electrical system repairs
• Indoor plumbing system repairs
• Heating system repairs (propane or natural gas furnaces, electric space heaters)
• Ductwork repairs
• Water heater repairs
• Dishwasher repairs
• Air conditioning repairs
• Kitchen range/oven repairs

Have a feeling you’ll need more household items covered than the above? Many providers offer extra coverage of more non-essential or obscure items such as:

• Trash compactor repair
• Roof repair
• Ice machine repair
• Television repair or replacement
• Computer repair
• Re-keying services (changing the locks)
• Ceiling fan repair
• Jacuzzi motor and pump repair

What does a home warranty not cover?

When you’re considering buying a home warranty, it’s just as important to learn exactly what’s not covered in the policy as what is. One major point to keep in mind when shopping for a home warranty is that your policy won’t cover damage caused by fire, theft, weather or other extreme circumstances.

You’re also out of luck if the damage to your home was caused by careless owner error or existed before you signed the contract. Coverage details vary from one warranty provider to the next, but generally speaking, here’s what you can expect your home warranty policy not to cover:

• Sprinkler repair or replacement
• Garage door opener repair or replacement
• Spa and pool repair or replacement
• Wood-burning fireplace repair or replacement

Keep in mind these items aren’t set in stone. In fact, it’s possible to request special coverage on items not usually covered by home warranties, like pools. Check with your prospective warranty provider to see what sort of policy expansions are available for your situation.

How much does a home warranty cost?

Home warranty costs vary, depending on the details of your coverage but generally range from $350 to $900 for a full year. Most home warranty policies deal in one-year packages, with more robust coverage options costing as much as $1,400 annually. It’s important to note that paying for a home warranty may not fully get you off the hook when it comes to repair bills. Appliance or system repair service fees can range from $75 to $150 or more, depending on the size and complexity of the appliance.

Should I buy a home warranty?

It depends. Home warranties can certainly save you money and provide valuable peace of mind, but they don’t make sense for everyone.

If your home and its systems are fairly new, chances are you won’t need to cash in on a home warranty for a while. This means you might fork out a many years’ worth of annual fees to your warranty provider before needing its help. Also, newer house systems are often already covered under manufacturer warranties, making a home warranty unnecessary.

The same goes for appliances. If they’re new, they probably still have manufacturer coverage. Home warranties also make somewhat less sense for folks who are diligent in maintaining their home’s appliances and systems and who do most repairs themselves.

Conversely, if most of your home systems and appliances are getting on in years, a good home warranty makes sense. It’s also a great help for those who aren’t DIY inclined and would rather rely on licensed professionals when they need something fixed in the house.

» MORE: Is a home warranty worth it?

Bottom line

If you’re worried about high household repair costs, a home warranty is certainly worth considering.

“A home warranty can provide homeowners with peace of mind by protecting them from unexpected repair costs,” said Virtudazo, the housing industry expert. “Researching reputable providers, understanding coverage options, and carefully reviewing contract terms will help you make an informed decision when purchasing a home warranty.

“My experience in the housing industry has taught me the importance of such safeguards to ensure the longevity and financial well-being of your home.”