The Basics of the Home Warranty

A home warranty is a coverage plan that protects a homeowner’s systems and appliances from eventual breakdown or inefficiency.

Without a home warranty, a homeowner has to bear the full cost of repairs or replacement for their systems and appliances. This is where a home warranty could save a homeowner hundreds or thousands of dollars—instead of paying the repair or replacement costs in full, the homeowner would only pay the monthly coverage premium and a small service fee.

When signing up for a home warranty plan, it's important to choose a plan that includes the systems and appliances you want covered. Most home warranty companies will offer multiple coverage packages that list which systems and appliances are covered.

Finally, it’s vital to ensure your covered systems and appliances meet the prerequisites for repair or replacement coverage. Home warranty companies may require homeowners to supply repair history, receipt of purchase, or other specific maintenance and condition identifiers to be eligible for coverage.

What’s Covered: Systems, Appliances, and Extras

Most home warranty companies offer four areas of coverage: 1) Appliances, 2) Systems, 3) Combined, and 4) Extras or Add-ons. We’ll break each one down, below:

Appliances: An appliance is a machine, tool, or component of a home that serves one particular function. The key thing to remember is that an appliance is usually a stand-alone machine, as it does not require a series of interconnected components to function. Examples include: washing machine, built-in microwave, dishwasher.

Systems: A system is a network of machines, tools, or components that serve a particular function in a home. Systems are different from appliances in that they depend on a network to function: if one part of the network breaks down, the whole system could malfunction. Examples include: heating systems, plumbing, and ductwork.

Combined: A combined plan would cover both appliances and systems. The monthly premium price is usually higher for combined plans as opposed to singular plans.

Extras: Some home warranty companies will offer coverage extras, sometimes called add-ons, which protect traditionally uncovered systems, appliances, and gadgets in a home. Extras might be sold a la carte or in a package. Extras may include: TVs, pools, and computers.

The Benefits of a Home Warranty

Save Money: Homeowners should consider signing up for a home warranty because it can save them hundreds, even thousands, of dollars in repair or replacement costs. Repair prices tend to average $150, but replacement costs can kill a budget. At the higher end, replacing an AC system can cost $5,000+.

Save Time: Home warranties can also help save homeowners time when seeking repairs or replacements. Once signed up to a home warranty, homeowners only have to submit a claim to have a technician automatically dispatched, usually within a day or two.

Bonus Benefits: Some home warranty companies sweeten the deal with extra perks. Homeowners might be eligible for exclusive discounts on home security products, restaurants, or popular products.

A Home Warranty Plan vs. Home Insurance

It’s easy to confuse a home insurance plan for a home warranty plan. Let’s break them down:

Home Insurance: A home insurance plan typically covers structural damage, natural disasters, fires, theft, and vandalization.

Home Warranty: A home warranty plan covers some or all of a home’s appliances and systems, regardless of the reason they stop functioning.