Home Warranty: What It Covers, How It Works, Costs, and When to Consider One

What is a home warranty?

A home warranty (also called a residential service contract) is a service contract that helps cover repair or replacement costs for household systems and appliances that break down from normal wear and tear during the contract period. It is not the same as homeowners insurance, which protects against loss or damage from events like fire or certain natural disasters.

How a home warranty works

• When a covered appliance or system fails, the homeowner contacts the warranty provider.
• The provider assigns an approved service contractor to assess the problem.
• The contractor reports the cause and cost to the warranty company.
• If the claim is approved, the warrantor pays for repair or replacement subject to the contract terms; the homeowner typically pays a service fee for the visit.

What home warranties commonly cover

Coverage varies by plan and company, but typical items include:
* Major appliances: refrigerator, oven/range, dishwasher, built-in microwave, washer and dryer
* Home systems: HVAC (heating/cooling), plumbing, electrical
* Optional add-ons (for additional premium): pools/spas, well pumps, septic systems, garage door openers

Key coverage details to check
* Exclusions and limitations: read the fine print for component-level exclusions, age limits, and preexisting conditions.
* Coverage caps: many plans set maximum payout amounts per item or per contract year; you pay any costs above those limits.
* Service fees: each service call usually incurs a fee (trade call or service call fee). If multiple separate trades are needed (e.g., oven and refrigerator), you may pay multiple fees.

Qualifications and common reasons claims are denied

Home warranty providers typically deny claims for:
* Preexisting or known damage that existed before coverage began
* Poor maintenance, improper installation, misuse, or neglect
To avoid denials, address known issues found in a home inspection before purchase or confirm which items are excluded.

Homebuilder warranties vs. home warranties for existing homes

• Homebuilder warranties: often included with new construction, these can cover structural defects for several years and shorter periods for systems and appliances (examples: structural coverage up to 10 years, systems 1–2 years, appliances six months). Terms vary by builder.
• Home warranties for existing homes: often sold for one-year terms and may be purchased by sellers, buyers, or new homeowners; contracts may be renewable.

Costs

• Annual premiums: typically in the range of about $432 to $816, depending on plan and added options.
• Service call fees: published ranges vary; common fees are roughly $36–$150 per service call, depending on the provider and plan.
• Out-of-pocket exposure: you may pay the service fee for each visit, and any repair/replacement costs that exceed the plan’s coverage limits.

When a home warranty makes sense

• Buying an older home with unknown appliance/system ages or maintenance history.
• Wanting quicker access to preapproved service contractors without searching for technicians.
• Seeking predictable, periodic costs for small-to-moderate repairs rather than facing potentially large unexpected replacement bills.

When a home warranty may not be worth it

• If appliances and systems are new, under manufacturer warranties, or you prefer to shop directly for contractors.
• If you can comfortably cover major repair or replacement costs out of savings.

Short FAQ

Q: Is a home warranty required?
A: No. It’s optional and separate from homeowners insurance.

Q: Does a home warranty cover everything in the house?
A: No. Coverage depends on the contract—many items and specific components can be excluded or require add-ons.

Q: Can sellers or builders pay for a warranty?
A: Yes. Sellers sometimes offer a warranty to attract buyers; builders commonly provide limited warranties on new homes.

Choosing a plan

Compare:
* Covered items and exclusions
* Coverage caps per item and per contract year
* Service call fees and how multiple claims are handled
* Provider reputation, contractor network, and claim approval process

A home warranty can reduce the hassle and uncertainty of repairing older systems and appliances, but you should weigh premiums, service fees, coverage limits, and exclusions to decide if it fits your needs.