Repair technicians answering service calls as part of the standard terms of home warranties

Home Warranties 101: What Does a Home Warranty Cover?

Homeowners spend time, money, and resources to ensure their property is well-maintained. They pay for service calls for their appliances and annual maintenance for their home systems to keep them in good working order. Some people also buy home warranties to cover these expenses.

These service plans can help homeowners avoid these costly repairs. In this complete guide to home warranties, you’ll learn how these plans can help pay for service calls, repairs, and replacements for appliances and home systems. We’ll also give you five tips to help you identify home warranties that are best for you.

What Is a Home Warranty?

Home warranties are service contracts, not insurance policies. They provide homeowners with peace of mind. These plans pay for maintenance, replacements, and repairs for kitchen appliances and systems that break down. Home warranties protect property owners’ budgets from expensive repairs that can take months to pay off.

They provide reassurance for homeowners that experience unexpected problems with older appliances. However, home warranties only cover appliances inside your home. These policies pay for items when they break down — and nothing more.

Home warranties and a pre-home inspection can also be an attractive real estate selling point for homebuyers in the market for a new home. Individuals searching for rental properties also love these plans.

How do you know if a home warranty will be right for you? These are ideal options for homeowners who have older appliances that are no longer under warranty. Additionally, it can help people who are on a tight budget avoid costly repairs.

Homebuilders typically provide home warranties for new homes that last for the first year after their construction. Some home warranty businesses provide special warranties from recently built homes.

Home warranties are excellent options for previously owned places, too, especially if they have aging appliances and systems.

What Are the Differences Between Homeowners Insurance Coverage and Home Warranties?

Many people confuse homeowners insurance with home warranties since both pay for home repairs. Although both pay for issues resulting from unexpected situations, they don’t provide the same coverage.

Homeowners insurance reimburses you for covered property losses resulting from catastrophic events. These incidents include:

  • Severe storms
  • Fires
  • Smoke
  • Theft
  • Vandalism
  • Falling trees
  • And other events

Banks and lenders require homeowners to buy this coverage before they issue a mortgage.

These policies also provide personal liability protection. If a visitor gets injured at your home, your policy may cover their medical fees. Insurers also provide “Loss of Use” coverage in some policies. For instance, a storm may blow down a tree, crushing your roof. If you can’t stay in your home, your insurer will pay for a hotel room until it’s repaired.

Additionally, homeowners insurance only pays when a covered catastrophic event damages your appliances. They don’t cover repairs to these items when they break down because of normal usage.

Home warranties aren’t insurance plans. These service plans cover appliances that break down from normal wear and tear. Those plans don’t cover your home’s structure or appliances when an unexpected catastrophic event occurs.

When shopping for coverage, here are two things to keep in mind.

  • Do you need to protect your home’s structure and appliances if an unexpected disaster occurs? If so, a home insurance policy is the best choice.
  • Do you need coverage for your appliances if they break down because of normal wear and tear? If so, a home warranty offers better protection.

How Does a Home Warranty Work?

After your appliance or home system breaks down, contact the home warranty company’s representative. Ask if your plan covers repairs for major appliances. If it does, the representative will set up an appointment time with a pre-screened, licensed service provider in your area.

Once a service provider arrives, they will ask questions about your appliance. The professional will assess your situation and discuss your coverage. Once the provider completes the assessment, they will determine what actions to take, including whether to repair (or replace) your appliance or system.

You’ll generally only have to pay a service fee (most range from $75 to $125) once the professional completes the call. Your home warranty company will reimburse the remainder of the expenses.

What Does a Typical Home Warranty Plan Cover?

Home warranty companies offer plans that replace or repair malfunctioning appliances and systems. Each company’s contractual agreement will determine what coverage they provide. When searching for a home warranty, search for companies that offer plans you can customize for your needs.

According to the National Home Service Contract Association, these plans cover:

Major Systems

  • Electrical
  • Plumbing systems
  • Heating, Ventilation, Air Conditioning systems (HVAC)
  • Water heaters
  • Ductwork
  • Central vacuum

Home Appliances

  • Dishwashers
  • Ice makers
  • Oven, ranges, and cooktops
  • Garbage disposals
  • Refrigerator
  • Washers

Optional Coverage

  • Garage door openers
  • Bathtubs with motors (optional)
  • Spa equipment (optional)
  • Air conditioners(optional)
  • Pool equipment (optional)
  • Septic systems

Additional Home Warranty Options

Home warranties vary in the coverage options they provide. If you need a great plan, there are several marketplace options available:

  • Plans for Specific Appliances and Systems –Some home warranty companies have plans that only cover specific systems. These include heating, ventilation, and air conditioning (HVAC systems), electrical, and plumbing. Other companies offer appliances-only plans. You can also choose plans that cover certain items that no longer have a manufacturer’s warranty.
  • Optional Add-on Coverage – Do you need to protect home systems like your septic tank, well pumps, or sump pumps? There are standard warranties for optional equipment, such as refrigerators and microwaves. If you have more than one fridge, you’ll need another warranty since most only cover the primary kitchen refrigerator.
  • Robust Plans – These comprehensive plans include coverage for other systems and amenities. It pays for items like trash compactors, ceiling fans, and saunas. Others include whirlpools, swimming pools, free standard ice machines, and other systems. You can also find coverage for a rekeying service to change all your locks.

Pro tip for choosing between home warranties:

Select companies that allow you to customize the home warranty plans to fit your needs.

What’s Included With Home Warranty Coverage?

Home warranty companies limit how much they’ll pay for the diagnosis, repair, or replacement of covered systems. Each amount varies depending on the machine.

For instance, some companies reimburse at a rate of $1,500 (per covered item) for hot water boilers or steam-circulating air systems. The amount ranges from $1,000 to $3,500 reimbursement rate for HVAC systems. Others will pay no more than $500 for plumbing and ductwork.

According to U.S. News and World Report, some warranty companies itemize how much they pay for certain items. Other companies provide a set fee for all appliances, which can be as much as $3,500 per machine.

Home Warranty Companies Don’t Cover Everything

Home warranties don’t cover damage to your home’s foundation, walls, finishes, paint, or flooring. Your homeowners’ insurance would pay for these repairs if a covered catastrophic event caused the damage.

Most home warranties also exclude appliances used in commercial settings like restaurants and shops. This restriction often applies to brands like Thermador, Sub-Zero, and others. Standard home warranties won’t cover services for these items.

Home warranties also exclude coverage for pre-existing wear. They don’t cover damaged appliances at the end of their life expectancy. These plans don’t pay for repairs that correct the improper installation of machines and systems.

Pro tip for using home warranties:

Is your appliance at the end of its life expectancy? Replace it instead of purchasing an extended home warranty plan.

When Do Home Warranties Companies Pay Claims?

Most home warranty companies require a 30-day waiting period before they pay for service. Once you submit a claim, your warranty provider will send a service person within three to five business days. Their technicians respond to emergencies within 24 hours.

After the service call, the home warranty company will reimburse the bill within 14 to 21 business days.

Does a Home Warranty Pay for HVAC Issues?

Most home warranties pay for the replacement and repair of HVAC systems. These include replacing or repairing furnaces, air conditioning units, cooling systems, heating systems, and other units. Some warranties don’t cover repairs or replacements for appliances that don’t receive regular servicing.

Are Plumbing Issues Covered by a Home Warranty?

Home warranties generally cover issues such as stoppages, clogged systems, leaks, backups, and other problems. These plans don’t cover plumbing-related damage. For instance, it won’t pay for plumbing-related damage to your drywall, flooring, or structure.

Most warranty companies offer add-on coverage for sump pumps, pumps, and septic tanks unless they already cover them.

Does a Home Warranty Cover Electrical Issues?

Coverage for interior electrical systems differs depending on the home warranty company. Most plans pay for major components like light fixtures, wiring, attic vents, fans, and other wired systems.

Others exclude coverage for circuit overloads, wiring, computers, video, security systems, and faceplates.

Will a Home Warranty Cover Roofs?

Select home warranty companies cover roof repairs. But the majority won’t pay for roof replacements. These companies only cover repairs for roof leaks (and not for all portions of the roof). They also exclude leaks that occur on patios or metal roofing. Warranties don’t cover damage to items resulting from roof damage.

Do Home Warranty Plans Have Deductibles?

Yes, some home warranties have deductibles, like insurance plans. Deductibles are the amount the home warranty expects you to pay for repairs before your coverage starts.

What to Search for When Shopping for a Home Warranty

Homeowner getting repair services through her home warranty plan

Here are a few tips to keep in mind when shopping for home warranties:

1. Take an inventory of your home’s systems and appliances

Before signing up for a warranty, list the machines, HVAC equipment, and other items that need coverage. If an older appliance is at the end of its life, consider replacing it instead of buying coverage. Most home warranty companies won’t pay for the service, replacement, or repairs of these items.

2. Compile a list of home warranty companies

Are you searching for a good home warranty provider? Ask your relatives or friends which companies they use. Find out what experiences they had with the provider and if they liked the service. You can also research the top warranty plans online. Search for unbiased reviews to learn about the experiences of other customers. During this process, keep a list of the home warranty companies that you prefer. To find a home warranty service provider in your state, visit the National Home Contract Association’s website.

3. Get free quotes from home warranty providers

Next, get quotes from the home warranty companies to find out what they offer. The prices will differ from one geographic location to another. Ask for a sample contract to see what the provider offers.

4. Find out about your plan’s deductible

All plans require customers to pay a deductible for each service call. Some companies will offer lower rates than others. If you pay a higher premium, you will have a lower deductible for your policy. The amount you pay will depend on your home warranty contract.

5. Ask these questions:

  • What is the wait time for service calls? Ask the home warranty company how much time you must wait before you receive service.
  • Do they cover emergencies? Does your home warranty provide emergency coverage? If so, ask if you must buy it as an extra service or as a deductible on your regular policy.

Keep these tips in mind while shopping for coverage, so you can identify a plan that’s perfect for you.

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