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ByAdam Morgan Contributor

Adam Morgan is a former senior editor for Reviews.com. He's written about banking, credit cards, home warranties, insurance, and many other subjects.

A home warranty is a service contract that covers your home’s systems and appliances — under certain circumstances and with limitations — in the event they need repairs or replacements. It’s usually an annual contract, where you pay a monthly or annual fee in exchange for coverage. While you need home insurance to buy a home, home insurance doesn’t cover the systems or appliances within your home — you know, the ones that tend to break down every once in a while, like air-conditioning, plumbing, refrigerators, and dishwashers. That’s where a home warranty comes in.

How Does a Home Warranty Work?

When a system or appliance covered by your home warranty breaks down:

  • You file a claim with the home warranty company, either online, on a mobile app, or over the phone.
  • The company schedules an on-site visit from a repair technician in its network (and charges a $50-$125 “service fee”).
  • The technician determines whether a repair or a replacement is the best option, and may even make minor repairs that day.

If the repair or replacement is less expensive than your contract’s “liability cap” for that system or appliance (and if the reason for the breakdown is covered by your plan), you won’t have to pay another dime to get it fixed. If it exceeds your liability cap, the home warranty company will pay for the repair up to the contract’s limit, and then you’ll be responsible for the rest.

For example, if your contract’s liability cap for refrigerators is $500, but it’s going to cost $600 to repair it, your home warranty company will cover that first $500, and you’ll be left with the additional $100 out-of-pocket. However, a good home warranty plan takes the average cost of repairs into account when setting liability caps, so hopefully, your repair costs will usually fall under the cap.

What Does a Home Warranty Cover?

There are more than 65 major providers in the United States, from older companies like American Home Shield and TotalProtect to new ones like Choice and the Home Service Club. Each provider offers multiple plans depending on what systems and appliances you want covered, as well as standalone “add-on” coverage options that can go with any plan.

Here are the most common systems and appliances covered by home warranties:

Systems

  • Air-conditioning
  • Heating
  • Plumbing
  • Electrical
  • Garbage Disposals
  • Ceiling Fans
  • Doorbells
  • Water Heaters
  • Central Vacuum

Appliances

  • Refrigerator
  • Dishwasher
  • Range/Oven/Cooktop
  • Clothes Washer
  • Clothes Dryer
  • Built-in Microwave
  • Free-Standing Ice Maker
  • Garage Door Opener
  • Trash Compactor

How Much Does a Home Warranty Cost?

Our in-house research shows that in 2019, the average monthly fee for a basic home warranty plan is between $35 and $100. On top of that, the average service fee is between $60 and $90.

Things to Do Before Buying a Home Warranty

Read the sample contract

Every home warranty company worth doing business with will have a sample contract available on its website. No one enjoys reading fine print, but it is absolutely crucial for homeowners to take a close look at these contracts before purchasing a home warranty. That way, you’ll know exactly what your contract covers and for how much. Specifically, check all of the following items:

  • The recall period for faulty repairs or replacements (it can range from 30 days to 180 days for parts, labor, or both).
  • The liability caps for systems or appliances (anywhere from $250 to $10,000). Compare those with our “average cost of repairs and replacements” table in the “Guide to Home Warranties” section below.
  • The contract term (usually somewhere between 1-3 years).

Compare providers

Shopping for home warranties is just like shopping for home insurance — the only way you’ll get the best coverage for the best price is if you compare providers. We’ve made that process easier for you here, by comparing plans, perks, and limitations of the 8 best home warranty companies, but you should still contact each company you’re interested in, ask for a personalized quote, and compare their coverage plans.

Choose the right plan

Your home warranty decision is about more than just finding the right provider; you’ll also need to select the right coverage plan for your home. You don’t want to pay for more coverage than you need, but at the same time, you don’t want to pay out-of-pocket when something you forgot breaks down. Make a list of every major system and appliance in your home, check to see which plans cover all of them, and which plans require a standalone add-on for something you own. Then calculate the total cost and compare.

What’s the Best Home Warranty Company?

There is no single “best” home warranty company for every home, but we investigated 65 home warranty companies, more than 120 plans, and spoke with third-party experts to determine the 8 best home warranty companies of 2019.

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