A guide for buying home warranty plans

Home warranties can help cover the cost of repairing home systems and appliances. However, they don’t cover everything, and they are different from homeowners insurance. In this article, we’ll explain everything you need to know about a home warranty and whether you should get one.

What is a home warranty?

A home warranty is a service contract for your home’s built-in systems and appliances. If these fail due to normal wear and tear during the warranty period, the home warranty can help cover the cost of getting them running again. Here are some common types of home warranties:

Home warranty vs. home insurance

Home warranties and homeowners insurance are not the same.

Home insurance helps protect you against home damage, loss of personal belongings, and liability if someone gets hurt on your property. By contrast, a home warranty helps cover the cost of repairing a home’s internal systems and appliances due to regular wear and tear.

Carefully review all your policies before seeking additional coverage.

How much does a home warranty cost?

The average cost of a home warranty breaks down like this:

• Annual costs range from $350 to $900.
• Service fees range from $75 to $150.
• Monthly payments range between $30 to $90.

Keep in mind that home warranty premiums are based on many factors, including the type of coverage, service fees, add-on coverage, and the home's type, size, and location.

Here’s a breakdown of some of the best home warranty companies.

How does a home warranty work?

This is what using your home warranty looks like:

1. Filing a claim. Contact your home warranty provider to report an issue with your home appliance or system.
2. Schedule a technician visit. Schedule a time for a technician to visit and diagnose the problem. This typically requires paying a service fee.
3. Claim processing. The home warranty provider will evaluate the claim based on the technician’s review and determine if it’s fully or partially covered.
4. Repair or replacement. If your claim is approved, the repair will proceed. In some cases, you may receive a replacement.

What does a home warranty cover?

A home warranty plan typically covers home systems and appliances. In some cases, the warranty provider may offer add-on coverage for items like pool pumps and spas.

Common coverages

Common items covered by home warranties include:

• Kitchen appliances
• Washers and dryers
• HVAC systems
• Water heaters
• Electrical systems
• Plumbing systems

What’s not covered by a home warranty?

A home warranty generally doesn't cover a home's structure, foundation, walls, or quality unless it's a new home covered by a home builder's warranty.

Common exclusions

Common items not covered by a home warranty include:

• Wells
• Septic tanks
• Solar panels
• Sprinkler systems
• Pools

Advantages and disadvantages of a home warranty

Consider the pros and cons of a home warranty before you buy one.

Pros

• Predictable cost: A monthly premium that covers regular wear and tear on home systems and appliances can minimize major costs from unexpected repairs.
• All-in-one maintenance solution: Instead of shopping for different contractors, you can call your home warranty provider anytime an issue arises.
• Peace of mind: Homeowners can rest easy knowing that if anything happens to their home systems or appliances, their warranty will help cover the cost.

Cons

• Limited coverage: Home warranty coverage is often capped at a certain dollar amount and may exclude certain issues.
• Service fees: You’ll need to pay a service fee anytime a technician visits or works on your home.
• Fewer service provider options: You don’t get to choose which service providers work on your home. The home warranty company does.

Are home warranties worth the cost?

Home warranties can be worth the cost if you want the peace of mind they offer. For example, first-time home buyers may want a home warranty to protect their investment and reduce their risk of a major repair bill in the future.

What to look for in a home warranty plan

As a homeowner, you have many home warranty providers to choose from. Consider the type of coverage you need, then compare providers and policies.

Carefully review the following when considering any home warranty policy:

• What’s covered. Review policy terms to understand any exclusions that may apply.
• Coverage limits. Ensure you know what the maximum coverage amount is per claim.
• Customer reviews. Read online reviews and ratings from past and current customers.
• Servicing fees. Understand how much you’ll pay for each service event.
• Add-ons. Explore add-on options and whether they’re worth the extra protection.
• Terms and conditions. Read the fine print to ensure you fully understand the policy.

Finally, obtain and compare multiple quotes before choosing a home warranty plan.

FAQ

Here are answers to some frequently asked questions regarding home warranties.

Am I required to have a home warranty?

No, but you may want to consider one if you can’t cover the cost of an unexpected repair or want the peace of mind it provides.

How do I know if I already have a home warranty?

To determine whether you already have a home warranty, check your closing documents or ask the real estate agent who helped you buy the home.

When can I purchase a home warranty?

You can buy a home warranty at any time. Just apply for one from a home warranty provider.

What’s the average cost of a home warranty plan?

The average cost of a home warranty plan is between $350 and $900 per year.

Are home warranties worth paying for?

They can be if you value predictable costs and the peace of mind that comes with coverage.

The bottom line: Home warranty plans protect your home and assets

Ultimately, a home warranty can be a smart investment if you want predictable costs and peace of mind about your home systems and appliances. By understanding what’s covered, comparing providers, and weighing the pros and cons, you can make an informed decision.

Are you crunching the numbers on your new house and a home warranty? Get expert advice and a reliable price range for your dream home. Start the mortgage approval process today with Rocket Mortgage.