Understanding the Basics: What is a Home Warranty?
If you've ever wondered, "What do home warranties cover?" you're in the right place. In this article, we’ll break down what a home warranty is, what it typically includes (and excludes), how much it costs and when it makes sense to get one.
A home warranty is a service contract that covers the repair or replacement of major home systems and appliances that break down due to normal wear and tear. It's like a maintenance plan that helps homeowners manage the cost of unexpected repairs.
Think of a home warranty as a backup plan for things inside your home that keep it running. Unlike insurance, which protects against events like a fire or natural disasters, a home warranty steps in when your fridge suddenly stops working or your heating system goes out in the middle of winter.
How Do Home Warranties Work?
Here’s a simplified breakdown of how a home warranty works:
- You pay a monthly or annual fee for coverage.
- If a covered item breaks, you file a claim with your home warranty company.
- The company sends a technician to inspect the issue.
- You pay a service fee (usually between $75 and $125).
- If approved, the repair or replacement is covered, up to policy limits.
What Do Home Warranties Cover?
Coverage depends on the provider and plan, but most home warranty companies offer three types of plans: systems-only, appliances-only and combo plans. Here’s what’s typically covered under each:
- Home systems. Heating and cooling systems (including furnace and central A/C), electrical systems, plumbing systems, water heaters and ductwork.
- Appliances. Refrigerator, dishwasher, oven, range, cooktop, microwave (built-in), washer, dryer and garbage disposal.
- Optional or add-on coverage. Some companies offer additional coverage for pool or spa equipment, septic systems, well pumps, roof leaks and additional refrigerators or freezers.
What Do Home Warranties Not Cover?
It’s equally important to understand what a home warranty doesn’t cover. Many homeowners are caught off guard when their claim is denied for something that falls outside their plan. Common exclusions include:
- Pre-existing conditions.
- Improper installation or code violations.
- Cosmetic issues (like dents or scratches).
- Damage from misuse or neglect.
- Structural elements (walls, windows, doors etc.).
Most plans also have caps on how much they’ll pay per item or per year. For example, your warranty might only cover up to $2,000 for an HVAC repair, even if the replacement cost is $5,000.
How Much Does a Home Warranty Cost?
The cost of a home warranty can vary based on your location, the size of your home and the coverage you choose. Monthly premiums range from $35–$70, annual costs range from $420–$840 and service fees (per claim) can be anywhere from $75–$125 on average.
Some companies allow you to customize your coverage to fit your needs and budget. However, cheaper plans often come with less comprehensive protection and lower payout limits.
When Should You Get a Home Warranty?
A home warranty isn’t right for everyone but in the right situation, it can provide helpful financial protection and peace of mind. You might benefit from a home warranty if:
- You’re buying an older home with aging appliances.
- You don’t have a large emergency fund for home repairs.
- You want to avoid the hassle of finding and vetting repair technicians.
- You’re a first-time homeowner unfamiliar with maintenance costs.
A home warranty may not be worth it if:
- You’re handy and prefer DIY repairs.
- Your appliances are still under manufacturer warranty.
- You have money set aside for unexpected repairs.
Pros and Cons of Home Warranties
Like any financial product, home warranties come with both benefits and drawbacks.
Pros of Home Warranties
- Covers many unexpected repair costs.
- Simplifies the repair process (no need to shop for a technician).
- Can be a selling point when listing your home.
- Peace of mind, especially for new homeowners.
Cons of Home Warranties
- Not all repairs are covered.
- Coverage limits and exclusions can be frustrating.
- Service fees add up quickly if you file multiple claims.
- You don’t get to choose your repair provider.
Choosing The Right Home Warranty Provider
Not all companies are created equal. Here are a few reputable providers worth considering:
1. American Home Shield
- Plans from $39.99/month.
- Covers up to $5,000 per appliance.
- Known for flexible plans and strong customer support.
2. Choice Home Warranty
- Plans from $44.99/month.
- Covers 15+ appliances and systems.
- $100 service call fee.
3. Liberty Home Guard
- Plans from $49.99/month.
- Highly rated for customer service.
- Optional add-ons for over 20 items.
Before committing, read reviews, compare sample contracts and make sure you understand the fine print.
Final Notes
So, what do home warranties cover? The answer: quite a bit, but not everything. A home warranty can be a useful financial tool, especially if you're moving into a home with older systems or if you're not prepared for large repair bills.
That said, it’s not a one-size-fits-all solution. Be sure to weigh the cost, coverage limits and exclusions before deciding. And remember: a home warranty is about peace of mind. If that peace comes at a fair price and fits your lifestyle, it might just be worth the investment.