Fact Checked

Comprehensive Guide to Understanding What Home Warranties Cover

Updated October 23, 2024

A home warranty is a service contract that covers the repair or replacement of major home systems and household appliances when they break down due to normal wear and tear. If you’re a homeowner, it can provide peace of mind by offering financial protection against unexpected repair costs. Unlike homeowner’s insurance, which covers damage from events like fires or storms, a home warranty focuses on the everyday functioning of your home’s essential components.

Home warranties typically last for one year and can be renewed annually. When you have a problem with a covered item, you simply contact your home warranty provider, pay a service fee, and they will send a professional to diagnose and fix the issue. If the item can’t be repaired, the warranty company will usually replace it, subject to the terms of your contract.

These contracts are especially popular among first-time homeowners, people selling their homes, and homeowners with older appliances and systems. By choosing the coverage option that best suits your needs, they can be a smart and effective way to budget for home repairs and avoid large, unexpected expenses.

Key Components Covered by Home Warranties

Home warranties generally cover two main categories: home systems and home appliances. The specific items included can vary depending on the home warranty company and their offered plans, but there are some common elements you can expect to find in most home warranty contracts.

Home systems typically covered include heating, air conditioning, electrical, and plumbing. These are the core systems that keep your home functioning and comfortable. On the appliance side, you’ll often find coverage for kitchen essentials like refrigerators, ovens, and dishwashers, as well as laundry machines.

It’s important to note that home warranties cover the functional parts of these items. For example, a home warranty might cover the motor in your refrigerator, but not the shelves or drawers inside it. Always read your contract carefully to understand exactly what’s included and what’s not.

Major Systems Typically Included

Most home warranty plans cover the major systems in your home. These are the complex, expensive systems that are essential for daily living and comfort. Here’s a closer look at what’s typically included:

Heating and Air Conditioning (HVAC): This usually covers furnaces, air conditioners, and heat pumps. Some plans may also include ductwork.
Electrical Systems: This covers your home’s electrical wiring, circuit breakers, and sometimes ceiling fans or doorbells.
Plumbing Systems: This typically includes pipes, drains, water heaters, and sometimes even sump pumps or well pumps.
Water Heaters: Both tank and tankless water heaters are often covered, including the heating elements and thermostats.

Remember, while these systems are commonly covered, the extent of coverage can vary. For instance, some plans might cover your entire HVAC system, while others might have a different coverage limit for your furnace versus your air conditioner. Always check your specific plan details to understand your coverage.

Common Appliances Under Home Warranty

Home warranties often cover a range of household appliances that you use daily. These are typically standalone units that perform specific functions. Here’s a list of appliances commonly covered under home warranty plans:

Refrigerator: This usually includes the main kitchen refrigerator, but may not cover stand-alone freezers or mini-fridges.
Oven, Stove, and Range: Both gas and electric models are typically covered.
Dishwasher: Built-in dishwashers are usually included in standard plans.
Microwave: Built-in microwaves are often covered, but countertop models may not be.
Washer and Dryer: Both clothes washers and dryers are commonly included in appliance coverage plans.
Garbage Disposal: This kitchen sink fixture is often covered under basic plans.
Trash Compactor: If your home has one, it’s often included in more comprehensive plans.

Again, while these appliances are commonly covered, the specific components within each appliance that are covered can vary. For example, a plan might cover the motor in your dishwasher but not the racks or wheels. Review your plan to make sure you understand what is included for each covered appliance.

Optional Add-Ons for Enhanced Coverage

Many home warranty companies offer additional coverage options that you can add to your basic plan for an extra fee. These add-ons allow you to customize your coverage to better fit your home’s specific needs. Here are some common optional add-ons:

Pool and Spa Equipment: This can cover pumps, heaters, and filtration systems for in-ground pools and spas.
Septic System: This covers the septic tank and line from the house.
Well Pump: For homes with private wells, this covers the pump and related components.
Roof Leak Repair: This typically covers repairs to leaks over living areas.
Central Vacuum: This covers the motor and electrical components of built-in vacuum systems.
Second Refrigerator or Freezer: Many plans only cover one refrigerator, so this add-on can protect additional units.
Outdoor Kitchen Appliances: Some companies offer coverage for built-in grills and other outdoor kitchen equipment.

These add-ons can provide valuable protection for homeowners with specific needs. However, they also increase your home warranty cost, so consider carefully which ones are worth the extra expense for your situation.

Exclusions: What Home Warranties Don’t Cover

While home warranties can provide valuable protection, it’s crucial to understand their limitations. Here are some common exclusions you might find in a home warranty contract:

Pre-existing Conditions: If an item was already broken or improperly maintained before the warranty began, it likely won’t be covered.
Cosmetic Defects: Scratches, dents, or other issues that don’t affect the item’s function are typically not covered.
Improper Installation or Maintenance: If an item fails due to improper installation or lack of maintenance, the warranty may not cover it.
Code Violations: If repairing an item requires bringing it up to current building codes, the extra cost is often not covered.
Certain Brands or High-end Models: Some warranties have limits on what they’ll pay for repairs or replacements, which may not be enough for luxury brands.
Damage From Pests or Animals: Issues caused by rodents, insects, or pets are usually not covered.
Natural Disasters: Damage from natural disasters like floods, earthquakes, or lightning strikes is typically covered by homeowners insurance, not home warranties.

Always read your contract carefully to understand what’s excluded. If you’re unsure about anything, don’t hesitate to ask the warranty company for clarification. Understanding these exclusions can help you avoid surprises and make the most of your home warranty coverage.

Cost Factors of Home Warranties

The cost of a home warranty can vary widely based on several factors. Understanding these can help you budget appropriately and choose the right plan for your needs. Here are the main cost factors to consider:

Coverage Level: Basic plans covering just systems or just appliances are generally cheaper than comprehensive plans covering both.
Home Size: Larger homes often cost more to cover because they typically have more systems and appliances.
Location: Prices can vary by state or even by zip code, often reflecting differences in labor and parts costs in different areas.
Service Fee: This is the amount you pay for each service call, typically ranging from $75 to $125. Plans with higher service fees usually have lower monthly premiums, and vice versa.
Add-ons: Any optional coverage you add will increase your overall cost.
Provider: Different companies charge different rates for similar coverage, so it pays to shop around.

On average, you can expect to pay anywhere from $300 to $600 per year for a basic plan, with more comprehensive coverage costing up to $1,000 or more annually. Remember, while cost is important, it shouldn’t be the only factor in your decision. Consider the coverage limits, exclusions, and company reputation as well.

Comparison: Home Warranty vs. Homeowners Insurance

While both home warranties and homeowner’s insurance provide protection for your home, they cover very different things. Understanding these differences is crucial for comprehensive home protection. Here’s a breakdown:

Home Warranty:

Covers repair or replacement of home systems and appliances due to normal wear and tear
Is optional (not required by mortgage lenders)
Typically costs $300-$600 per year, plus service fees
Covers things like HVAC systems, plumbing, electrical systems, and major appliances

Homeowner’s Insurance:

Covers damage to your home’s structure and belongings due to perils like fire, theft, or natural disasters
Is typically required by mortgage lenders
Cost varies widely based on home value and location, but averages around $1,200 per year
Covers your home’s structure, personal property, liability, and additional living expenses if you’re temporarily displaced

While homeowner’s insurance protects you from unexpected events, a home warranty helps with the predictable breakdowns that occur over time. Many homeowners find value in having both types of protection. Together, they can provide comprehensive coverage for most home-related issues you might face.

How to Choose the Right Home Warranty Plan

Selecting the right home warranty plan requires careful consideration of your home’s needs and your budget. Here are some steps to help you choose:

Assess Your Needs: Make a list of the systems and appliances in your home. Consider their age and condition. This will help you determine what level of coverage you need.
Compare Plans: Look at plans from multiple providers. Compare not just prices, but also coverage limits, exclusions, and customer reviews.
Read the Fine Print: Carefully review the contract, paying special attention to coverage limits, exclusions, and the claims process.
Consider Service Fees: Lower monthly premiums often mean higher service fees, and vice versa. Choose the balance that works best for your budget.
Check for Customization: Some companies allow you to customize your plan. This can be a good option if you need coverage for specific items.
Research the Company: Look into the company’s reputation. Check their ratings with the Better Business Bureau and read customer reviews.
Understand the Claims Process: Make sure you’re comfortable with how claims are handled and how service providers are selected.

Remember, the cheapest plan isn’t always the best value. Look for a plan that offers the coverage you need at a price you can afford, from a company with a good reputation for customer service.

Tips for Getting the Most Out of Your Home Warranty

Once you’ve chosen a home warranty plan, there are several things you can do to maximize its value:

Understand Your Coverage: Thoroughly read your contract so you know exactly what’s covered and what’s not. This can prevent surprises when you need to make a claim.
Keep Up with Maintenance: Most warranties require that covered items are properly maintained. Keep records of your maintenance efforts.
Act Quickly: If you notice a problem with a covered item, submit a claim right away. Some issues can worsen if left unaddressed, potentially voiding your coverage.
Be Present for Repairs: When a technician comes to your home, be there if possible. This allows you to explain the problem in detail and understand the repair process.
Keep Good Records: Document all your interactions with the warranty company and service providers. This can be helpful if you need to follow up on a claim.
Use Preferred Providers: Some companies offer incentives for using their network of service providers. This can sometimes result in faster service or lower fees.
Consider Renewals Carefully: Before renewing your warranty, reassess your needs. If you’ve recently replaced major appliances or systems, you might need less coverage.

By following these tips, you can ensure you’re getting the most value from your home warranty investment. Remember, a home warranty is a tool to help manage your home repair costs – the more effectively you use it, the more it can save you in the long run.

Frequently Asked Questions About Home Warranties

Q: Are home warranties worth it?

A: This depends on your individual situation. If you have older appliances and systems, or if you prefer predictable home maintenance costs, a home warranty can be valuable. However, if your home is new or you’re handy with repairs, you might not need one.

Q: Can I buy a home warranty at any time?

A: Yes, you can purchase a home warranty at any time, not just when buying a home. However, there’s usually a waiting period (often 30 days) before you can make a claim.

Q: How quickly are claims processed?

A: This varies by company, but most aim to have a technician contact you within 48 hours of filing a claim. Actual repair times can vary depending on the issue and parts availability.

Q: Can I choose my own repair technician?

A: Most home warranty companies have a network of pre-screened technicians they use. Some may allow you to use your own technician, but this often requires pre-approval.

Q: What if a covered item can’t be repaired?

A: If a covered item can’t be repaired, most warranties will replace it. However, this is usually subject to coverage limits specified in your contract.

Q: Do home warranties cover old appliances?

A: Generally, yes. Most home warranties cover old appliances as long as they’re in good working order when the contract begins. However, there may be coverage limits for very old items.

Q: Can I cancel my home warranty?

A: Yes, most companies allow you to cancel at any time. However, there may be cancellation fees, especially if you’ve already used the warranty for a repair.

Remember, while these are common questions, specific answers can vary by provider. Always refer to your specific contract or contact your warranty provider for the most accurate information about your coverage.