A Comprehensive Guide to Home Warranties

Your home may be the most significant investment you’ve ever made. While being a homeowner is rewarding, it can also involve costly, unexpected repairs. Whether it’s a broken air conditioner in July, a furnace failure in the dead of winter, or a faulty refrigerator, repairs or replacements can cost thousands.

Home warranties may benefit homeowners who want to avoid costly repair surprises — especially those with high-end appliances. But warranties can be pricey, and coverage varies by company.

How does a home warranty work?

A home warranty is a service contract that helps pay to repair or replace appliances and major home systems.^[1] You can buy one anytime and choose the coverage level that fits your needs.

Depending on the plan, basic service contracts may cover only kitchen appliances, while comprehensive plans cover all household appliances, HVAC, plumbing, and electrical systems. Some companies also offer add-on coverage for roofs, pools, hot tubs, septic systems, or lawn sprinkler systems.

After you buy a warranty, there’s typically a waiting period between 30 and 90 days. Once that period ends, you can start requesting repairs.

When you need repairs for a covered item or system, the warranty company will arrange for a service technician to visit your home. You’ll typically pay a service fee for each visit, which can cost between $65 and $125. The service tech will diagnose the problem and then make repairs.

Most home warranties last for one year, but some companies offer three- or five-year plans.

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The benefits of home warranties

A home warranty can provide peace of mind to new homeowners — especially if they’re unsure about the age and condition of the appliances and home systems.

Benefits include the following:

• Access to vetted contractors: When you contact the home warranty company, it’ll connect you with a partner service technician. Technicians are vetted, licensed, bonded, and insured, so you can feel confident they’ll repair the issue properly.

• Protection for your savings: When you’re a new homeowner, your budget may be stretched just about as far as it can go. Repairing an air conditioner or fixing a broken washing machine is expensive. A home warranty can provide added protection so you won’t have to drain your savings to cover unexpected repairs.

• Easier budgeting: A home warranty has a fixed monthly cost, making it easier to work into your budget. Service fees are relatively low, so repair costs are more manageable.

What home warranties cover

A home warranty policy covers items or systems that stop working due to age, wear and tear, or mechanical issues. Warranties typically cover:

• Heating, ventilation, and air conditioning (HVAC) systems

• Electrical systems

• Plumbing systems

• Refrigerators

• Ovens

• Washers and dryers

• Garbage disposals

Coverage varies by company and plan. While a basic home warranty may cover only your kitchen appliances, a premium plan may provide more comprehensive coverage for electrical, plumbing, and HVAC systems. Warranty coverage typically excludes accidental damage or pre-existing problems.

You can sometimes buy add-on coverage for pools, water heaters, lawn sprinkler systems, or septic pumps.

What home warranties don’t cover

Although home warranties can protect your home’s systems and appliances, they typically exclude the following:^[2]

• Damage covered by homeowners insurance: Home warranties cover wear and tear, mechanical breakdowns, and aging systems and appliances. In contrast, home insurance typically covers damage caused by natural disasters, theft, or vandalism.^[3]

• Cosmetic damage: Home warranties don’t cover scratches, dents, chipped paint, or other surface-level imperfections.

• Structural issues: Home warranties won’t pay to repair foundation issues such as cracks or settling.

• Pre-existing issues or problems that develop during the waiting period: Home warranties typically exclude issues that existed before coverage started or developed during the waiting period.

• Damages related to lack of maintenance: Home warranty companies often require service records showing regular maintenance — especially for major home systems. If a system hasn’t been regularly serviced or maintained, the company may deny your claim.

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How much money will a home warranty save you on repairs?

A home warranty can offer significant savings. For example, imagine you have a home warranty that costs $600 per year. If your ducted central air conditioning system breaks down, the repair could cost up to $2,000. 

If your service fee is $125 and the warranty covers the full repair, your out-of-pocket cost would be $725 ($600 + $125). That means you’d save $1,275 compared to paying the full repair cost on your own.

Your coverage amounts depend on your policy, what components broke, and your policy’s coverage limits.

How much does a home warranty cost?

Home warranties can cost between $15 and $80 per month. A basic plan that covers kitchen appliances will be cheaper than a comprehensive plan that protects appliances, electrical systems, and HVAC systems. Adding optional coverage to your warranty — such as for a pool, sump pump, or sprinkler system — can increase costs, too.

In addition to your monthly premium, you’ll pay a service fee, typically between $75 and $125, for each repair visit.

Overall, your home warranty costs will depend on several factors:

• 

  Location

  Areas with a high cost of living usually have higher home warranty costs since parts and repair services are more expensive.

• 

  Home size

  Larger homes often have more appliances and more complex HVAC systems, so home warranties tend to be more expensive for properties with more square footage.

• 

  Service fee

  Choosing a higher service fee, such as $100 or $125, means you may pay less for your monthly premiums.

Top home warranty companies to consider

Many companies offer home warranty plans. Based on coverage, plan options, and cost, the following are some of the best home warranty companies available:

Warranty Company	Plan Options	Monthly Premiums	Service Fees	Add-Ons
2-10 Home Buyers Warranty	Simply Kitchen (base plan), Complete Home, and Pinnacle Home	$32–$52	$65, $85, or $100	Yes, including pools, water softeners, septic systems, and roof leaks
AFC Home Warranty	Silver (base plan), Gold, Platinum, and Diamond	$56–$97	$75 or $125	Yes, roof leak coverage and home electronics
American Home Shield	ShieldSilver (base plan), ShieldGold, and ShieldPlatinum	$30–$80	$100 or $125	Yes, including roof leak repair, septic pump, well pump, guest house, and more
Choice Home Warranty	Basic (base plan) and Total Plan	$47–$55	$100	Yes, including pool, spa, limited roof leak, central vacuum, well pump, sump pump, and septic system
First American Home Warranty	Starter Plan, Essential Plan, and Premium Plan	$52–$87	$100 or $125	Extra refrigerators, pool and spa equipment, roof leak repair, septic system, water softener, well pump, HVAC tune-ups
Liberty Home Guard	Appliance Guard (base plan), Systems Guard, and Total Home Guard	$45–$55	$75–$125	Yes, including pool, spa, lawn sprinkler system, generators, septic systems, pest control, and limited roof leak
Select Home Warranty	Bronze Care (base plan), Gold Care, and Platinum Care	$60–$64	$75–$100	Yes, including pool, lawn sprinkler system, sump pump, limited roof leak, septic system, and central vacuum

What to know before buying a home warranty

Reading the fine print before signing a home warranty agreement is essential. Make sure you understand the following key details:

• Emergency costs: Home warranties typically only pay for service technicians during normal business hours. The home warranty company may charge a higher fee if you need after-hours service.

• Work guarantees: Some home warranty companies guarantee their work for a specific period, such as 30 or 90 days. If the repair fails after that guarantee period, you’ll have to pay another service fee to fix the item or system.

• Cancellation terms: Cancellation policies and fees vary by company. Some companies allow you to cancel anytime but charge a $50 cancellation fee. Others say their warranties are noncancelable after the first 30 days.

Each company’s terms and conditions can vary significantly. To avoid surprises, it’s important to review sample contracts for exclusions, coverage limits, claim requirements, and work guarantees.

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Alternatives to a home warranty

Although home warranties can be helpful, they can also be expensive. These are some other options that may be a better fit:

• Emergency fund: Financial experts typically recommend setting aside 1% to 4% of your home’s value in an emergency fund every year to cover maintenance costs.^[4]

• Equipment breakdown coverage: If you have a homeowners insurance policy, you may be able to add equipment breakdown coverage. This endorsement won’t cover wear and tear, but it’ll pay to repair or replace an item after an electrical surge or mechanical breakdown.

• Manufacturer warranties: New appliances typically include a manufacturer’s warranty that covers defects or breakdowns for a set period — usually six to 12 months from the purchase date.

Home warranty vs. home insurance

A home warranty complements home insurance and isn’t meant to replace it. While a home insurance policy covers your home from damage related to storms, fires, theft, and other perils, a home warranty covers your appliances and systems for issues related to age, mechanical breakdowns, and wear and tear.

Together, a homeowners insurance policy and a home warranty can protect your home and give you peace of mind.

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