Reading a Home Warranty Contract

A home warranty brochure tells you what a plan is meant to do. The contract tells you what it will actually do. Reading it takes some patience, but knowing where to look makes it much easier. This guide walks through the sections that matter most.

Get the full contract first

Ask for a sample contract for your state before you buy. Marketing pages and comparison charts are summaries. The contract is what the company follows when deciding a claim. If a seller will not share it, treat that as a warning sign.

Keep a copy for your records once you buy.

The coverage section

This part lists what is covered. For each system or appliance, look for two lists:

• Covered parts, such as compressors, motors, thermostats or control boards
• Not covered parts, such as filters, racks, shelves, knobs, or cosmetic panels

Pay attention to wording like "only the following parts are covered." That means anything not listed is excluded. For example, a refrigerator section may cover the compressor and sealed system but exclude the ice maker unless you pay for an upgrade.

Limits and caps

Most home warranties have dollar limits. These can apply:

1. Per item, such as a cap on what the company pays for an appliance repair or replacement
2. Per system, such as a separate cap for HVAC
3. Per year or per contract term, as an aggregate cap

Some limits are separate for specific costs like refrigerant, code upgrades, crane rental or permits. A low cap on an expensive system can leave you with a large bill even when the repair is covered.

Also look for the service call or trade call fee. Then check:

• Is it charged per visit or per claim?
• Do follow-up visits for the same problem cost extra?
• Is there a separate fee if you cancel a scheduled appointment?

Exclusions

The exclusions section is usually long, and it is the most important part to read. Common exclusions include:

• Pre-existing conditions
• Improper installation or prior improper repairs
• Lack of maintenance
• Damage from pests, flooding, fire or other events that insurance may cover
• Cosmetic defects
• Code upgrades, permits and access costs
• Systems or appliances used commercially

Next, if an item cannot be repaired, the company may replace it. Read how that works:

• Will they replace it with a unit of similar features and capacity, not necessarily the same brand or color?
• Can they offer a cash payout instead of a replacement?
• Who pays for removing the old unit and installation modifications?

Contractor choice and claims

The claims section explains how to request service, how quickly the company aims to respond, and whether you can use your own contractor. If you can choose your own, look for preapproval requirements and reimbursement rules. Many plans require you to call them first, and they may not pay for work done without approval.

Cancellation and renewal

Finally, check:

• How to cancel and whether there is a cancellation fee
• How refunds are calculated if you cancel partway through
• Whether the plan auto-renews and how much notice you get of price changes
• Whether the contract transfers if you sell the house

Rules can vary by state, so see our home warranty by state page. Our home warranty overview explains the basics.

A simple reading checklist

As you read, note answers to these questions:

• What is covered, and which parts are excluded?
• What are the dollar limits for my most important items?
• How much is the service fee?
• How are pre-existing conditions defined?
• What happens if something cannot be repaired?
• How do I cancel?

How Warranty Wizards can help

Warranty Wizards helps you compare home warranty plans from third-party providers and explains what each contract covers before you buy. You can request a free quote to get started.