What Does a Home Warranty Cover?

By: Kealia Reynolds Buying a home, Home warranty

When a major system or appliance breaks down in your home, you could be stuck paying exorbitant repair costs—unless you have a home warranty. Below, we’ll discuss what’s commonly covered under a home warranty, how it works, and how to choose the best policy for you and your home.

What is a home warranty?

A home warranty, also known as a home service agreement, is a one-year contract with a warranty company that helps cover the cost of repairs or replacements for major home systems and appliances that fail due to normal wear and tear.

What does a home warranty cover?

Unlike homeowners insurance, which covers property damage from natural disasters and burglaries, a home warranty covers broken systems and appliances, like your HVAC system or garbage disposal. However, certain appliances may not be covered depending on where you live and the coverage you have.

Make sure you read your service contract thoroughly to know what is and isn’t covered under your policy.

Items typically covered under a home warranty:
  • Heating and cooling systems, including a water heater, central air conditioning, and ductwork
  • Plumbing systems, including faucets and toilets
  • Electrical systems, including plugs, switches, and circuit breakers
  • Kitchen appliances, such as a dishwasher or refrigerator
  • Add-ons, including a washer and dryer
  • Doorbells
  • Smoke detectors

Note that some home warranty plans will allow you to purchase optional coverage for items like your swimming pool, spa, or home entertainment system at an additional price.

Limits and exclusions on home warranty coverage

Before signing a home warranty contract, make sure that you understand what is and isn’t covered. Some repairs may not be made or paid for if there is evidence of improper maintenance, code violations, unusual wear and tear, or improper installation.

Sometimes, home warranties will have limits on systems set at a dollar amount. For example, a home warranty company may cover a repair on your dishwasher up to a certain dollar amount, leaving you to pay for the remaining repair expenses. Your contract will stipulate how much your warranty company will pay for repairs and replacements and if there is a cap on how much they will pay.

Additionally, your service contract could include exclusions for systems or appliances that fail due to improper maintenance. Home warranty companies will pay only for repairs and replacements that happen due to normal wear and tear. As long as the system or appliance in question has received continuous maintenance and was in working order when the house was bought, your home warranty should cover the repair or replacement.

Ask your real estate agent about getting a home inspection before purchasing a warranty to determine any pre-existing conditions that a system or appliance might have. These “known conditions” could be included as an exclusion in your contract, so it’s a good idea to address these issues before securing a home warranty.

How does a home warranty work?

If one of your home systems or appliances fail, call your home warranty company as soon as possible. Here’s what you can expect when you need a repair or replacement:

  1. The warranty company will call a trusted service provider in their network to address the issue.
  2. The contractor will then contact the homeowner and make an appointment to inspect the broken appliance or system.
  3. Once an appointment is made, the service provider will arrive to the homeowner’s house, diagnose the problem, and send a repair request to the home warranty company.
  4. The homeowner pays a small trade service fee to the home warranty company for sending a contractor out to diagnose the problem. This service call fee will typically cost between $75 and $125.
  5. The contractor will schedule a follow-up appointment and return to fix the broken system or appliance. If the issue can’t be fixed, the home warranty company may pay to replace and install a new appliance, depending on your home warranty coverage.

How much does a home warranty cost?

A basic home warranty will cost around $300 per year while more comprehensive plans could cost as much as $800 per year. Your home warranty company may provide the option of paying the cost in monthly increments, but most companies will require you to pay in full after signing a contract.

The actual cost of a home warranty plan will depend on where you live, the coverage you choose, and the warranty company you buy from. Your warranty company may offer special discounts on policy prices or provide more coverage at a lower price, but these one-time deals are generally offered when you purchase a home.

How to choose the best home warranty

Before purchasing a home warranty, do your research and check out consumer reviews and third-party sites to compare plans and get a sense of customer satisfaction, pricing, limitations, exclusions, home warranty features, and more. Don’t be afraid to ask a home warranty company to speak to a client that’s filed a claim and get advice from friends and family who have warranties with the company.

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