What Is a Home Warranty?

A home warranty is a service contract that helps pay for repairs or replacement of major home systems and appliances when they break down from normal use. It is not the same as homeowners insurance, and it is not a promise that everything in your house will be fixed for free. Here is how home warranties work and who tends to find them useful.

Home warranty vs. homeowners insurance

These two products cover different problems.

• Homeowners insurance covers sudden damage from events like fire, storms, theft or a burst pipe. It also includes liability coverage. Mortgage lenders usually require it.
• A home warranty covers breakdowns of systems and appliances from normal wear and tear. It is optional.

For example, if lightning strikes and fries your air conditioner, that may be an insurance claim. If the AC compressor simply wears out after years of use, that is the kind of failure a home warranty is designed for.

What a home warranty usually covers

Plans are often split into systems, appliances or a combination of both.

Systems often include:

• Heating and air conditioning
• Plumbing lines and stoppages
• Electrical systems
• Water heaters
• Ductwork

Appliances often include:

• Refrigerator
• Oven, range and cooktop
• Dishwasher
• Built-in microwave
• Clothes washer and dryer
• Garbage disposal

Extras like a pool and spa, well pump, septic system or second refrigerator are often available as add-ons for an additional cost. Our covered items page explains each category.

How a claim works

When something breaks, you contact the warranty company instead of calling a repair person yourself. The usual process looks like this:

1. You submit a claim online or by phone.
2. The company assigns a contractor from its network.
3. The contractor diagnoses the problem.
4. You pay a service call fee, sometimes called a trade call fee, for each visit.
5. If the failure is covered, the company authorizes the repair or replacement.

Some plans let you choose your own licensed contractor and then reimburse you. Read the contract to see which approach yours uses.

Common limits and exclusions

Home warranties have rules that can affect what you get paid. Look for:

• Coverage caps per item or per year
• Pre-existing condition exclusions for problems that started before coverage
• Maintenance requirements, such as keeping up with HVAC filter changes
• Code upgrade and permit costs, which some plans exclude or limit
• Access costs, like opening walls or floors to reach a pipe
• Waiting periods before coverage begins, often for plans bought outside a home sale

Who tends to find them useful

A home warranty may make sense if:

• You bought a home with older systems and appliances.
• You would have trouble paying for a sudden large repair.
• You want one number to call instead of finding contractors yourself.
• You are selling a home and want to offer buyers some reassurance.

It may make less sense if your systems and appliances are new and still under manufacturer warranties, or if you prefer to set aside your own repair savings and choose your own contractors.

Manufacturer warranties still matter

New appliances and HVAC equipment often come with their own manufacturer warranties, which may cover parts for a set period. A home warranty does not replace those. If an item is still under its manufacturer warranty, the home warranty company may ask you to use that coverage first. Keep receipts and registration records for newer equipment so you know what each one covers.

How pricing works

You usually pay an annual or monthly premium plus a service fee for each claim. Prices vary by location, home size, plan level and add-ons. When comparing, look at the total cost, including how many service calls you are likely to make in a year. Plan availability and rules can also vary by state; see our home warranty by state page.

How Warranty Wizards can help

Warranty Wizards helps you compare home warranty plans from third-party providers and explains what each plan covers before you buy. You can request a free quote to see options for your home.