How Does A Home Warranty Work?

A home warranty is a service contract to help replace and repair home systems and appliances. Coverage often provides replacement services and discounts repairs but does not always cover the total cost of an issue.

This type of warranty typically includes protection for home systems and common appliances. By providing financial protection for these unforeseen repairs, home warranties provide homeowners with additional assurance and help alleviate the financial burden associated with home maintenance.

Home warranties help protect your home from unexpected repairs. When something breaks down, you can file a claim with the warranty company, and they’ll assign a service provider or repairman to assess the problem and carry out necessary repairs. This will ultimately save you the hassle of finding a suitable repair person on your own, saving time and money.

If your repair claim is covered under the warranty, then the home warranty company will coordinate and cover the cost up to the limits outlined in your contract. Reviewing your plan’s specific terms and conditions is important to ensure you know what is covered and how to file a claim.

For those with older appliances or older homes, a home warranty’s cost can be worth it. A home warranty allows you to protect the functionality of your home’s systems and appliances when things begin to unravel at the seams, but its true value lies in the convenience of not doing anything yourself: a company sends a serviceperson to your house without requiring you to shop around for the best person or company for the job.

If you own a brand new home or new appliances, you may still be covered by manufacturer warranties and not need a home warranty until after your original warranties expire.

Home Warranty Pros and Cons

HOME WARRANTY PROS	HOME WARRANTY CONS
Save on inevitable repairs	Service calls fees and coverage limits
Convenience	Fine print
No need to DIY	Less control
Relatively inexpensive	May never use

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Everything eventually wears down. A home warranty can help you avoid butchering your piggy bank to repair or replace an appliance, but an overpriced warranty can also slowly bleed your piggy bank dry. Rather than spending your time researching which technician you may need, your home warranty provider will have a list of vetted professionals ready to come to handle your problem. It also means you will not have to struggle to watch tutorial videos online about how to fix your washing machine. Professionals can handle it for you.

For less than $100 a month, home warranties can keep costs low for unwanted surprise repairs that can come up.

Many home warranties set limits on how many repairs or how much the warranty will cover per year. Though monthly fees may not be high, service call fees range from $75 to $125 per call and an unfortunate streak of multiple breakdowns can add up quickly. Your claims may be denied if the damage does not seem to be from normal wear and tear, depending on the terms of services in your contract.

Once the claim goes through, you will no longer be provided the option to fix or replace a system—the home warranty company decides for you. You may also never have to use the warranty and spend all the money on it anyway.

Home insurance typically covers your home’s structure and belongings from damage from most natural disasters. Warranties, on the other hand, should cover the breakdowns caused by normal wear and tear. Home warranties usually remain optional when you borrow money to buy a house, but insurance is typically required. Each serves a different purpose to help protect your home.

The national average for a home warranty costs $1,050 yearly. Yearly cost can range from as low as $85 all the way up to $8,000. Monthly premiums tend to fall between $20 and $75. You can expect to pay a $75 to $125 service when you need to call in a repair.

Each plan’s coverage varies. A basic or standard plan may cover appliances such as a refrigerator or stove, but things typically not available with every house, like septic systems or swimming pools, must often be added on.

Coverage plans for home warranties commonly cover:

• Plumbing systems
• Electrical systems
• Heating and cooling systems, including water heaters
• Kitchen appliances (stove, oven, dishwasher, built-in microwave, garbage disposal, etc)
• Laundry appliances

Damage covered by homeowner’s insurance is not usually covered by a home warranty. Damage caused by severe weather, vandalism, theft, water damage, fire damage and other damage extraneous to daily usage remain the responsibility of home insurance or you, the homeowner.

Some potential reasons to be denied coverage by your home warranty include pre-existing conditions to your contract or larger issues with your home: improper maintenance or installation, misuse, pest damage, structural issues, corrosion and sediment or building code violations.

If you’re a homeowner, you know that unexpected repairs and replacements can be stressful. That’s why home warranties are extremely helpful to have. A home warranty offers homeowners a range of benefits, such as: 

• Financial protection: Financial protection against unexpected repairs or replacements of covered systems and appliances.
• Peace of mind: Homeowners can have peace of mind, knowing they have a cost-effective solution for addressing unforeseen breakdowns and minimizing the financial burden of home maintenance and repairs.
• Comprehensive coverage: Convenience through a streamlined claims process, access to qualified service providers and comprehensive coverage for key home components. 
• Predictable budgeting: Predictable budgeting by reducing the risk of high out-of-pocket expenses.
• Transferable coverage: Transferable coverage that adds value when selling the home.

The average home warranty lasts for one year and can be renewed annually. When you sign up for a home warranty, a waiting period of somewhere between 10 to 30 days usually applies. During this time, you won’t be able to make claims. If you plan to extend or replace a manufacturer warranty using a home warranty product, be sure to sign up before your existing warranty runs out.

When choosing a home warranty company, ask yourself what you really need. How much will you need covered? Will a basic plan suffice or is there a second refrigerator you have that will need to be an add-on to your warranty? Request quotes from several reputable home warranty companies to ensure you get a good deal.

To arrive at the average costs in this article, a number of providers and cost databases were surveyed on national and local levels. All averaged figures were correct at the time of publication and may be subject to change.