Home Warranty Basics

A home warranty has become a necessity today, because they can save you tons of money. But which is the best home warranty company, and what do you need to know? We have you covered.

A home warranty is an essential purchase for many homeowners. In essence, it protects you financially when a covered home system or appliance needs repair or replacing. This can include the appliances, home systems like heating, plumbing, electric, and air conditioning, garage doors, and even roofs. Most companies also allow optional coverages for extras, like pools, spas, more appliances, and more.

There are many home warranty companies, and all are a little different in what they offer. Check out our reviews above for the best home warranty company for your needs.

But for the rest of this page, let’s answer some basic questions on home warranties.

What is a Home Warranty?

At a basic level, a home warranty will protect a homeowner financially if a covered home system or appliance needs repair or replacing. So if you buy a home, and then purchase a home warranty, and six months later, your water heater is on the fritz, your home warranty will cover the repair or replacement of such (assuming it is covered of course – more on this in a bit).

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So is a Home Warranty Like Insurance?

No. Although they may seem similar, and might even overlap a bit, they are very different.

First of all, Homeowners insurance is required by lenders, and covers a home and or parts of it in the event of loss or accident (fire, flood, wind damage, theft, etc.). While homeowners insurance may end up covering some of the things some home warranties will mention (for example, roof damage), the circumstances are not the same.

Home warranties are optional, and cover items and systems that are subject to normal wear and tear. So if you have an older home, and your plumbing system springs a leak because it’s old, assuming it’s part of your home warranty plan, you’ll be able to get that fixed without laying out a ton of money. But it won’t pay to have the flood cleaned up or for new carpets (but insurance might).

A good rule of the thumb to follow is a home warranty covers items and systems that break over the normal course of their life, and insurance covers damage from accidents or other unforeseen circumstances.

What is Covered with a Home Warranty?

Every home warranty company is going to have different plans that cover different systems, appliances, and more. For example, some will have a basic plan that covers the electrical system, but not the plumbing system. This may be a great option if you have a plumber in the house, but might not be the best choice for someone who has no plumbing skill at all.

The key is to choose a home warranty company and plan that fits your needs. If you have a pool, and want it covered, choose a company who offers optional pool coverage (most will, but still, check and be sure.)

Here are some common systems and appliances covered (either in a tier of coverage or as an option).

Again, the above is an example only – each company’s offerings and options are different in what they cover and what they don’t.

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How Much do Home Warranties Cost?

Most home warranty companies will have different tiers of coverage and price points. But in general terms, you can expect to pay between $300 and $1,000 a year for coverage. Admittedly, this is a wide range, but it reflects the coverage levels (i.e., bare-bones plans that only cover a few systems and appliances, and comprehensive plans that cover all systems, plus a roof, pool and spa.)

Who Does the Repairs?

In most cases, the home warranty company will have a list of local approved contractors and repair services. These are pre-screened people and companies, so you can feel good about using them. In some cases, some home warranty companies may allow you to use your own contractors, but that’s generally the exception, and not the rule.

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What are the Caveats I Need to Know?

There are a few things you need to be aware of. The first is, most home warranty companies will require a waiting period before filing a claim. Usually it’s 30 days – this ensures you aren’t buying the warranty and making a claim the next day.

Another caveat is the covered appliances have to be maintained. If the manufacturer has a maintenance schedule (like say a furnace will), it needs to be followed. So definitely be aware of this.

Most companies won’t care about the age of a system or appliance, as long as it’s in good working order at the start of the warranty. There will be limits on repair amounts or replacement (note: they will usually look to repair over replace), so make sure you know these (for example, your refrigerator limit may be $1500, which isn’t going to replace your 5k fridge if that’s what you have.)

But all of these things are spelled out in fairly clear language – home warranty companies are up front about what is covered and what isn’t, and what the limits are. So just make sure you are aware of everything, and get a home warranty that gives you the peace of mind you deserve.