A home warranty is a service contract that covers the cost of replacement or repairs if a major home system or appliance breaks down due to normal wear and tear.
Pat HowardPat HowardManaging Editor & Licensed Home Insurance ExpertPat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.&Kara McGinleyKara McGinleySenior Editor & Licensed Home Insurance ExpertKara McGinley is a former senior editor and licensed home insurance expert at Policygenius, where she specialized in homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Forbes Advisor, Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.
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A home warranty is a service plan that can provide an added layer of protection for your home’s systems and appliances. Most homeowners insurance policies won’t pay to repair or replace your plumbing, dishwasher, or any other system or appliance in your house if it stops working — wear and tear and maintenance-related damage is generally seen as the homeowner’s responsibility.
If your home has older systems and appliances, a home warranty could eventually pay off. But in some cases, you may find a home warranty is more trouble than it’s actually worth.
A home warranty is a service contract that pays for repairs or replacement of your home’s systems or appliances if they malfunction or break down due to normal wear and tear. A basic homeowners insurance policy covers your house and everything inside against most types of sudden and accidental damage or loss, like a fire, windstorm, or theft.
But this policy generally doesn’t extend to wear and tear or appliances that stop working because of old age. A home warranty essentially fills in that homeowners insurance gap.
Here’s a look at the different systems and appliances covered under standard home warranty insurance.
Unlike the relatively broad protection that you get with homeowners insurance, a home warranty doesn’t cover every system or appliance under your roof — just the ones specifically listed in your warranty contract. Additionally, you’re only covered if the loss is specifically due to the following:
There are instances where protection isn’t guaranteed by a home warranty
Home warranty companies will often refuse you coverage if the broken system or appliance predates you living in the home and they determine it wasn’t properly maintained. There are certain instances where this exclusion could make sense — like if you ignored an obvious leak or electrical issue that could have easily been fixed. But this is a major drawback of warranties, since the entire purpose of having one is to pay for expensive maintenance-related breakdown or wear and tear.
How much does a home warranty cost?
A home warranty costs anywhere from $300 to $600 a year on average, although prices can fluctuate depending on what kind of plan you have. For example, if you added a few optional coverages for your HVAC and spa equipment, you could be looking at a premium as high as $1,000peryear — which isn't much less than the average annual cost of homeowners insurance in some states.
Along with your monthly warranty premiums, you also have to pay a service fee every time a technician or contractor is sent to your home. Service fees will typically run you anywhere from $60 to $120.
Many times you don’t need a home warranty. For one, many new appliances already come with a manufacturer’s warranty. If you’re worried about your appliances breaking down, many home insurance companies offer equipment breakdown coverage, which is an endorsement that you can add to your policy for an additional fee. Equipment breakdown coverage protects your home appliances if they break due to electrical or mechanical failure, like if your boiler cracks due to low water conditions.
Equipment breakdown coverage can cost anywhere from $25 to $50 a year — significantly cheaper than most home warranties.
Are home warranties worth it?
With a home warranty, you have the comfort of knowing your home systems and appliances are protected if they go kaput, as well as the convenience of not having to seek out a contractor or technician yourself. But warranties are rarely a good deal, especially if your home’s systems or appliances are still protected under manufacturer or builder warranties.
Home warranty pros
Covers your home’s electrical, plumbing, heating, and water heater
Can cover older appliances if you buy a house with that comes with them, and you may be able to ask the seller to purchase the warranty on your behalf
Home warranty cons
You’ll likely need to pay extra if you want additional protection for any appliances or equipment not covered under the base plan
Expensive contracts — home warranties can cost $300 to $600 per year with additional costs
Known to have unfair rules around when you can actually use the plan — most warranties won’t cover damage to pre-owned systems or appliances if it’s determined that they lacked proper maintenance
When a home warranty can make sense ...
You’re a first-time homeowner. A home warranty could prove to be valuable for a first-time homeowner who isn’t familiar with what to do if your systems or appliances break down. With a warranty, you call the provider and they take care of the rest — if you’re covered, you simply pay a small fee for the repairs.
You live in an older house. A warranty might also be a good deal if you live in a house with older systems and appliances. If you’re buying an older home, the buyer’s inspection will likely include details about the age and condition of the home’s appliances. If the inspection uncovers, say, a host of plumbing issues, it’s worth asking the seller if they’ll cover the cost of a warranty or new plumbing.
You’re always pressed for time. If you’re not exactly the handy type and you’re pressed for time to find a repair person, having a home warranty saves you the trouble of comparing estimates and worrying about service contracts.
Why a home warranty might not make sense ...
It doesn’t cover every appliance and cause of breakdown. Warranties are quite limited in terms of what systems and appliances are covered and how they’re covered. Pools and hot tubs, for example, generally aren’t covered unless you pay for additional protection. Home furnaces and heating and cooling systems are usually covered, but certain components of home systems — like filters, vents, and baseboard casings — sometimes aren’t.
There are limits to how much the warranty company will pay. The contract will state how much you’re paid out per covered item or throughout the coverage term. Some warranty companies will limit payouts to $2,000 in total per covered item, and a $10,000 to $15,000 maximum limit per coverage period (the start and end date of the contract).
You don’t choose the service provider. One of the biggest drawbacks of home warranties is you typically don’t get to choose the contractor or the replacement appliance — your home warranty company does this for you on your behalf.
You might already be under a manufacturer's or builder's warranty. Many new systems and appliances are covered under the manufacturer’s warranty for anywhere from one to five years from the purchase date. If you live in a newly built home, the builder’s contract also may include a warranty period for up to 10 years for systems, plumbing, or electrical issues.
3 home warranty companies
Now that you’ve considered the pros and cons of home warranties, here are a few of the top home warranty companies.
Equipment breakdown coverage is an optional home insurance add-on that covers your appliances from things like mechanical or electrical breakdown. However, damage due to age or normal wear and tear generally isn’t covered under this endorsement.
How do you file a home warranty claim?
In the event a system or appliance in your home breaks down, contact your home warranty company immediately to report the loss. After being notified of a claim, the home warranty company will send over a service contractor to assess the damage and provide a report to the warrantor.
If your claim is approved, the warranty company will send someone over to either repair or remove and replace the appliance. Your warranty company will then bill you your deductible, which is the out-of-pocket fee you’ll need to pay before your warranty plan will pay for the loss. Warranty deductibles are usually anywhere from $60 to $120.
How long does a home warranty last?
Typically, home warranty contracts last one year, but you may have the option of longer contracts depending on the company.
Pat Howard is a managing editor and licensed home insurance expert at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.
Kara McGinley is a former senior editor and licensed home insurance expert at Policygenius, where she specialized in homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Forbes Advisor, Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.