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Last updated on Sep 16, 2020

What You Should Know About Home Warranty

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Home warranties cover your home’s systems and appliances in the event that they need repairs or replacements. This can include air conditioning, plumbing, refrigerators, dishwashers and more. While home insurance covers the structure of your home in the case of an emergency, it often doesn’t cover the systems and appliances inside your home. Instead, a home warranty is necessary in order to cover these additional items. A home warranty usually takes the form of an annual contract and may have associated monthly or annual fees.

How does a home warranty policy work?

When a system or appliance covered by your home warranty breaks down, you file a claim with the home warranty company online, through a mobile app or over the phone. The company schedules an on-site visit from a repair technician in its network —  a $50 to $125 “service fee” may be charged. 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 your plan covers the reason for the breakdown — 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 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 have to pay 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 fall under the cap.

Home Warranty Costs

The average cost of a home warranty in 2020 ranges from $300 to $600 per year. This cost can vary depending on your location, your property and what type of coverage you want. In most cases, these annual fees are billed monthly. If you find yourself having to make a claim, you’ll usually have to pay a service call fee of $50 to $125 per technician visit. If your home warranty has coverage limits, you may have to pay a partial cost of any repair or replacement if it exceeds the limit of your coverage.

What Does a Home Warranty Cover?

There are a variety of home warranty providers in the U.S., including established companies like American Home Shield and TotalProtect, as well as up-and-comers like Choice and the Home Service Club. Home warranties vary from provider to provider in terms of what they cover. In some cases, customers may also be able to add on more coverage for certain appliances.

Covered 

Systems

  • Air conditioning
  • Heating
  • Plumbing
  • Electrical
  • Garbage disposal
  • Ceiling fans
  • Doorbell
  • Water heater
  • Central vacuum

Appliances

  • Refrigerator
  • Dishwasher
  • Range/oven/cooktop
  • Clothes washer
  • Clothes dryer
  • Built-in microwave
  • Freestanding ice maker
  • Garage door opener
  • Trash compactor

Not Covered

  • Cosmetic defects
  • Improper use
  • Pre-existing damage
  • Items covered by home insurance
  • Items covered by manufacturer warranties

What if I Need to Make a Claim?

If you need to make a claim, you should contact your home warranty provider. You can do so by phone, and many providers also have websites or mobile apps you can use to get in touch about a claim. You should contact your home warranty provider whenever an appliance breaks or stops working.

After you make a claim with your home warranty provider, they’ll contact a professional service provider. The provider will then set up an appointment with you before visiting your home to repair or replace your appliance.

Things to consider before buying a Home Warranty Policy

Before you buy a home warranty, you should be sure to 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 the fine print, but it’s absolutely crucial for homeowners to take a close look at these contracts before purchasing home warranties. That way, you’ll know exactly what your contract covers and for how much. You should be sure to check the recall period, the liability caps and the contract term.

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 eight best home warranty companies. We recommend you still contact each company you’re interested in, ask for a personalized quote and compare their coverage plans.

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 stand-alone add-on for something you own. Then calculate the total cost and compare.

Home Warranty Pros and Cons

Home warranties may not be necessary depending on the age and cost of your appliances and home systems. However, they can also provide peace of mind to homeowners and an easy fix if any appliance breaks and needs to be fixed or replaced.

Home Warranty Pros

  • Peace of mind
  • Professional repairs and replacement
  • Helpful for financial planning

Home Warranty Cons

  • Can be expensive
  • May not cover all items
  • May not cover items without proper maintenance

FAQS

Do I have to pay for a home warranty if I’m buying a home?

If you’re purchasing a home, you might want to consider a home warranty. When buying a new home, you may not expect a significant amount of repairs or replacements. If you’re purchasing an older home, however, a home warranty can save you money in the long run.

What are the benefits of a home warranty as a seller or buyer of a home?

Buyers or sellers can purchase home warranties. Sellers can provide home warranty coverage in order to encourage potential buyers and help reassure them that they won’t be saddled with the extensive repairs costs of an older home. If a seller doesn’t provide a home warranty, buyers may want to purchase their own to save on future repair costs of appliances and systems.

What are some things to do before buying a home warranty?

  • Read the provider’s sample contract
  • Compare home warranty companies & coverage plans
  • Make a list of important systems & appliances in your home
  • See which plans cover those items & any potential stand-alone plans
  • Estimate total cost & compare plans

About the Authors

Adam Morgan

Adam 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 (like running shoes) to give our readers the best information to assist in their buying decisions. His writing has been featured in The Los Angeles Times, Chicago Tribune, The AV Club, The Guardian, Chicago magazine, Minneapolis Star-Tribune, and elsewhere.