How Home Warranties Work
Homeowners have a lot of financial responsibilities. There’s no telling when a major appliance or system could fail and potentially cause thousands of dollars in unexpected expenses. But home warranties offer a solution. These service contracts are for big-ticket appliances and home systems. If something covered by the plan breaks down, then the warranty will kick in and cover repair or replacement costs.
This guide explains how home warranties work and examines what they do and don’t cover. It also answers frequently asked questions and looks at the pros and cons. Let’s dig into the details so you can make an educated decision about home warranties.
What Is a Home Warranty?
Home warranties are annual service contracts that cover repair and replacement costs of major appliances and home systems. They are also known as home protection plans. In the case of repairs, they usually cover the costs associated with both parts and labor. If a covered item requires a full replacement, then the warranty company shoulders most or all of the purchase and installation costs.
The best home warranty companies offer multiple levels of coverage, so homeowners can choose the right plan for their needs. Many home warranty providers even offer customizable plans beyond standard options. For example, some companies give policyholders the flexibility to include or exclude specific items. That way homeowners only pay for the coverage they want and need.
Pros and Cons of Home Warranties
What Do Home Warranties Cover?
The best home warranties are comprehensive in scope and cover both appliances and home systems. But some homeowners may decide that a narrower policy is better suited to their needs. In that case, many companies also offer plans that are narrower in what they cover.
For example, you can choose an appliance-only warranty to function like appliance insurance. Alternatively, you could opt to protect only your major home systems and exclude your appliances. A general rule of thumb: the more a home warranty covers, the more it will cost and vice-versa.
Systems coverage typically extends to major home systems such as:
- Home plumbing
- Water heater
The major appliances covered by home warranties typically include:
- Oven or range
- Garbage disposal
- Automatic garage door opener
These are far from comprehensive lists of systems and appliances that are commonly covered. But they should give you a good idea of what home warranty plans cover. Additionally, top home warranty companies frequently give customers the option to cover additional items such as:
- Sump pump and septic tank
- Jet bathtub pumps and motors
- Ceiling fans
- Swimming pool and equipment
- Spa and equipment
The most complete plans on the market also extend optional coverage to things like roofing components and pest infestations. However, strict terms, conditions, and limits usually apply to these forms of coverage as they can overlap with home insurance.
Home Warranties vs. Home Insurance
While home warranties act like a kind of home repair insurance, they are not the same as home insurance policies. The following table summarizes the major differences between the two:
Since they cover different things, it often makes financial sense to purchase both forms of protection. When combined, they offer the most complete protection money can buy and protect you from a wide-ranging set of risks and major expenses. If you’re looking for total peace of mind, then consider having both a home insurance policy and a home warranty.
Who Is a Home Warranty For?
Home warranty providers primarily focus their marketing on homeowners seeking protection from nasty financial surprises. While home warranties are often purchased by homeowners, there are also other types of people who can benefit from the coverage.
Homebuyers sometimes opt to purchase home warranty insurance before finalizing a real estate transaction. This provides added peace of mind when buying a resale property with wear and tear on its appliances and systems.
Property owners can acquire transferable and affordable home warranty plans before selling their homes. This can help make the property more attractive to prospective buyers, as the warranty may give the purchaser added confidence.
Rental property owners
People who own rental and investment properties can also purchase warranties to protect their assets. However, landlords will want to do some research. Many plans do not cover careless or negligent use, even if it was not the actual policyholder’s doing.
How to File a Claim
To file a claim, the policyholder must first contact the home warranty company. You should do this before taking any other action. Some plans contain fine print that nullifies coverage eligibility if an unauthorized technician or repair person services a broken-down item.
Next steps depend on the warranty company. Many companies work exclusively with approved service provider networks. In this case, the warranty company will make repair or replacement arrangements for you. Others allow customers to choose their own service professionals within certain limits. For example, they may require technicians to hold professional licensure to be eligible to perform repairs.
However, note that the claims process varies from one home warranty company to the next. You can check out the details of a warranty company’s filing process before you finalize coverage.
Compare Our Featured Picks
When you’re looking for a home warranty service to cover some of the most expensive things in your home, Choice Home Warranty is a great, respected option with a long track record. Since their founding in 2008, they’ve handled over 4 million service requests, and their network of 15,000 contractors across the U.S. means that they can help you get back in business right away when a heavy-duty appliance or HVAC system breaks down unexpectedly.
Choice Home Warranty has plans covering everything from your heating system to your kitchen appliances and ceiling fans, and much more. Right now, they also give you your first month free with the purchase of a 12-month contract. Higher tier plans also mean coverage for more luxury fixtures, like pools and a vacuum system. While Choice Home Warranty does not operate in Washington or California, you should consider them if you live in any of the other 48 states and are looking for the best home warranty provider for you. Read the full review.
American Home Shield
If you’re evaluating your home warranty options, sometimes it’s worth it to pay for experience. Arguably, no other company in the industry has more experience than American Home Shield. After their humble beginnings in 1971, the company is a notable trailblazer in the field and has grown their business and network in order to remain at the forefront of the market.
As with many home warranty providers, additional coverage for certain items may cost more. Additionally, while American Home Shield makes it easy to personalize your coverage with their build your own coverage option, it’s important to note that coverage is limited to 10 items. Experience doesn’t always equal expertise, but the two are one and the same with American Home Shield. Read the full review.
With the goal of providing the specific coverage you want, Select Home Warranty is a leading home warranty provider with three distinct coverage levels and numerous add-ons. They have several tiers of coverage to choose from—Bronze Care, Gold Care, and Platinum Care. The Bronze option covers everyday appliances, the Gold option is geared towards HVAC systems, and Platinum covers both.
A quick note that their plans aren’t available in every state, and they require regular maintenance checks—to be paid for by you. But ultimately, Select Home Warranty stands out in the industry by focusing on low premiums and customizability. This makes them a great option both for people looking to cover basic appliances and those hoping to pay for additional coverage. Read the full review.
Frequently Asked Questions
I have homeowners insurance. Does that mean I won’t need a home warranty?
Homeowners insurance offers many types of essential protection. However, home insurance policies typically don’t extend to breakdowns of appliances and home systems. That’s why having both home insurance and a home warranty can provide the greatest peace of mind.
Is a home warranty worth it?
Experts generally say that home warranties are worth it if you own an older home or purchased your home on the resale market. If you bought your home brand-new, then its appliances and systems may still be under manufacturer and builder warranties.
How long does a home warranty last?
Most home warranty contracts come with one-year coverage periods. You can renew the plan when the year is up or cancel the plan. The best home warranty plans carry no renewal obligations.
What kind of things aren’t covered by a home warranty?
Companies differ in their inclusions and exclusions. However, most don’t cover cosmetic damage like dents and scratches. Additionally, coverage may be nullified by things such as appliance and system misuse as well as lapses in required maintenance.
Too Long, Didn’t Read?
Home warranties are service contracts that cover major appliances and home systems. The warranty company agrees to pay repair or replacement costs for covered items in exchange for the customer’s payment. Unlike home insurance, a home warranty protects against breakdowns instead of accidents and disasters.
If you’re interested in protecting yourself from unexpected expenses that come with homeownership, then you’ll want to compare the best home warranty companies. Appliances and systems inevitably break down, but the right home warranty can make sure you’re prepared.