What Does a Home Warranty Cover?

Technician repairing air conditioner on the wall

Visoot Uthairam / Getty Images

A home warranty is a contract between you and a home warranty company. It covers the cost for repairs or replacement of the major systems and appliances you have in your home. The extent of coverage may vary significantly from one home warranty company to another, but these plans typically provide protection that keeps these systems and appliances operating safely and efficiently.

What are the Different Types of Home Warranty Plans?

Although home warranty companies may call their plans by different names, there are usually three types most companies offer that are similar in nature. Homebuyers may choose from:

  • A Major Home Systems plan. This covers the major home systems in your home, such as electrical and plumbing.
  • An Appliance plan. This covers major appliances like dishwashers and refrigerators
  • A Combo plan. This typically includes items from the Major Home System plans, and items from the Appliance plans.  

Examples of Covered Major Home Systems and Appliances

What systems and appliances are covered can vary depending on the company and the plan you select, so always do your research and compare plans carefully before making a decision on what will work best for your situation.

MAJOR HOME SYSTEMS APPLIANCES
Air Conditioning and Heating System Oven, Stove, Range
Electrical System Refrigerator
Plumbing System Dishwasher
Water Heater Built-In Microwave
Garbage Disposal Wash Machine
Instant Water Dispenser Clothes Dryer
Smoke Detectors Garage Door Opener
Central Vacuum Trash Compactor
Ceiling Fans Free Standing Ice Maker
Doorbell Built-In Food Center

In addition, some home warranty companies will offer add-ons for an additional price covering items that are not part of the initial plans. These may include:

  • Extended Electronic Warranty
  • Pool and In-ground Spas   
  • Well Pumps
  • Limited Roof Leaks
  • Sprinkler Systems
  • Re-Key Services
  • Septic Tank and Pumping

What Does a Home Warranty Not Cover?

Most home warranty plans cover repairs that are caused by normal wear and tear. There are types of repairs, however, that are not covered under your home warranty plan. When something is not covered, it is called an exclusion.

When selecting a home warranty plan, you should carefully go over the exclusions in a plan to ensure you understand what type of repairs are covered and what repairs are not.

Below are some common breakdowns and equipment failures that most home warranty companies do not cover:

  • Damage caused by improper installation or maintenance
  • Pre-existing conditions present at the time a home warranty begins
  • Misuse of a home system or appliance by using it for something other than its intended purpose
  • Cosmetic issues

Besides the exclusions in a home warranty plan, you should also exam the maximum amount of payouts for repairs for both major home systems and appliances. Sometimes, a home warranty company will set a payout cap on the amount they will pay toward a repair. As an example, they may only pay out $500 for an appliance or $1200 for a plumbing repair. Once the limit is reached, you handle the extra cost.

How Does a Home Warranty Plan Work?

When a major home system or appliance breakdown occurs, a claim is made with your home warranty company. If they determine your plan covers the breakdown, they will set up an appointment with a service provider in your area.

Once the service provider arrives, they will assess the problem and advise you of the needed repairs. If the home warranty company covers the repair, you will only pay the Trade Service Fee, which is paid directly to the service provider. This fee is generally between $75 go $125 and is due upon the arrival of the service technician.

If the repair is not covered under your home warranty plan, you must still pay the Trade Service Fee and the amount for the repairs, or you can simply pay the fee and hire someone else to make the repairs.

How Long Does the Home Warranty Coverage Last? 

Most home warranty plans are good for 12 months. Home warranty plans typically automatically renew each year unless you cancel.

When Does the Coverage on a Home Warranty Plan Begin?

Each company handles this a little differently. In some cases, the plan may start as soon as you make the first payment, however, some companies have a 30-day waiting period. This means you are responsible for the entire cost of repairs if the malfunction occurs prior to the start of the policy, or if it occurs during the first 30 days of the coverage period.

How Much Does a Home Warranty Plan Cost?

The amount that a home warranty plan costs depends on the service provider, as well as your location. You can typically plan on spending about $50 per month for a Combo plan that covers both major home systems and appliances. The cost can go up significantly if you choose to add other items, such as in-ground pools and spas, or septic tanks and pumping.

Home warranty plans generally cost around $350 to $700 a year, depending on the level of coverage you select.

Is a Home Warranty Plan the Same as Homeowners Insurance?

No, it’s easy to confuse the two, but they are two separate things. Homeowner’s insurance covers your home for unexpected catastrophic events, such as fire, weather, or structural damage. A home warranty covers the repairs for major home systems and appliances when they have a malfunction due to normal wear and tear. 

As an example, if a major home system like your air conditioning is covered and it malfunctions, the home warranty plan would pay for the repairs. If your toilet overflows and ruins the floor of your bathroom and hallway, however, the damage is considered structural and is covered under your home insurance plan.

Is a Home Warranty Worth the Cost?

Home warranty plans provide coverage for when something unexpected happens in your home. Depending on your financial situation and your budget, a home warranty can provide peace of mind for first-time homeowners, people who want to sell their home, or for homeowners who want more protection than what is offered through a factory warranty on their major home systems and appliances.