What Is a Home Warranty?

March 31, 2020 admin 0 Comments Home

A home warranty, also known as a home protection plan, is an annual service contract that covers repairs and replacements to major home systems and appliances that break down due to normal wear and tear. Unlike homeowner’s insurance, which covers liability, property loss, and short-term housing costs, a home warranty covers the systems and appliances in your home.

Keep reading to learn about the benefits of a home warranty, what exactly one covers, and how to purchase the right plan.

Benefits of a Home Warranty

A home warranty can save homeowners money on expensive repair and replacement costs. Additionally, it provides an easy way for homeowners to tackle repairs promptly. Instead of having to call around and find a trusted technician to complete the repairs for you, a warranty company will send a local expert to address your problem and get your system or appliance back into working condition. Some home warranty companies even let you choose a technician of your choice to complete repairs.

Another benefit of a home warranty is that it can be a valuable incentive if you’re selling your house. By mentioning that your home is protected by a home warranty plan and including it in the sale, potential homebuyers could be more likely to close the deal knowing that they’ll have additional protection on their home.

What Does a Home Warranty Cover?

Home warranty plans cover your home’s major systems and appliances. There are primarily three types of home warranty coverage: systems plans, appliance plans, and combination plans. Systems plans will cover whole-home systems like your air conditioning, plumbing, and electrical systems; appliance plans will cover appliances like your refrigerator, dishwasher, and oven. Combination plans cover both. Some home warranty companies will also allow you to customize your plan and pick and choose the items you want covered.

Below is a list of the most commonly covered home systems and appliances:

Most companies will also provide optional coverage for miscellaneous items like your pool, hot tub, spa, or second refrigerator. Customers can tack on these items to their plan for an additional cost every month.

How Much Does a Home Warranty Cost?

On average, a home warranty costs between $300–$600 for an annual plan. Basic plans that cover only systems or only appliances may fall on the low end of that spectrum, while more comprehensive plans that include systems, appliances, and add-ons will fall toward the higher end.

In addition to a monthly premium, customers will have to pay a service call fee every time a technician comes to your house to assess the covered item in question. Most service fees cost between $75–$125, but some companies offer service fees as low as $60.

Before buying a home warranty plan, ask the company if any current promotions or discounts are going on. Some companies, like Select Home Warranty, offer promotions where customers get two months free when signing up.

How Does a Home Warranty Work?

After purchasing a home warranty, coverage typically kicks in 30 days after your first payment. If a covered item breaks down under warranty, you can file a claim or service request with your company and get the issue addressed.

If you’re in the process of purchasing a home, you may be able to roll your home warranty into your mortgage payments. Talk to your mortgage lender and confirm with your home warranty company if this is possible.

In general, here’s what the process looks like:

A covered appliance or system breaks down due to normal wear and tear.
You call your home warranty provider to file a claim or you can submit a claim online.
Once the service request has been processed, the company will send a technician to address the broken item typically within 48 hours.
At your home, the technician takes a look at the system or appliance and recommends a repair or replacement. At this time, you would pay the set service fee.
If the repair is minor enough and the contractor has the necessary parts, they can make the repair right away. If a replacement is needed, they’ll have to schedule a follow-up appointment to complete the replacement.
After the repair or replacement is complete, you can enjoy your newly functioning system or appliance.

How to Buy a Home Warranty

Before purchasing a home warranty, there are a few factors you should consider to ensure you’re getting the best protection plan for your home.

Type of plan—Some companies will organize their plans based on the number of items covered under each plan while others will divide coverage by the type of item (systems vs. appliances, for example). Take note of the items you have in your home and weigh your coverage options before buying a plan.
Coverage caps—Sometimes, a home warranty provider will place coverage caps on certain appliances or systems. This limited amount will typically cover repair costs, but if a replacement needs to be made, it might not cover the entire thing. For example, if there’s a $2,000 coverage cap on your electrical system, you would be responsible for paying any amount past that limit.
Pricing—If you’re on a budget, there are plans below $50 a month that will suit your preferences. Most companies will let you pay on a monthly basis as opposed to an annual fee to make plans slightly more affordable for those who can’t pay a big fee upfront.
Customer service—In the event that an item breaks down in your home, you’ll want a responsive and helpful customer service team to help you get it fixed. The best home warranty companies offer 24/7 customer service and have an online portal or app where you can file claims.
Reputation—In a saturated warranty industry, it can be difficult to determine which company is legitimate. When searching for a provider, look for one that has at least a B rating from the Better Business Bureau (BBB) and read third-party customer reviews to get a good idea of what it’s like to work with the company.

Recommended Home Warranty Providers

If you’re ready to buy a home warranty, consider the following companies. We recommend getting a quote from all three providers so you can compare your options and negotiate better deals, finding a price that’s right for you.

American Home Shield: Best Coverage

With more than 45 years of experience, American Home Shield (AHS) is one of the most trusted companies in the business. Known for providing generous coverage caps and allowing customers to build their own plans, AHS also lets customers choose between a $75, $100, and $125 service fee. AHS may not be the right choice for you if you want to select your own contractor to complete the repairs or replacements.

Get a free AHS quote customized to your zip code.

Choice Home Warranty: Best Repair Guarantee

Choice Home Warranty (CHW) is great for homeowners who have older systems or appliances, as the company doesn’t deny coverage based on the age of your home or the age of your systems or appliances. Additionally, the company doesn’t require a home inspection before getting coverage. CHW gives customers the option of choosing between a basic plan or comprehensive plan for $36–$44 per month. It may not be the right choice for you if you live in California, Oklahoma, or Washington, as these states aren’t covered by the company.

Get a free CHW quote customized to your zip code.

First American Home Warranty: Best Value

First American Home Warranty (FAHW) is different from other companies in that it offers a First Class Upgrade, which covers systems and items even if they were improperly installed, modified, or maintained. It also has a risk-free, 30-day money-back guarantee and provides 24/7 customer service. FAHW may not be a good choice for you if you want protection specifically for your air conditioning.

Get a free FAHW quote customized to your zip code.

Home Warranty FAQ

Are home warranties worth the cost?

If you have systems and appliances that are about to be on the fritz or just want to have peace of mind that major items in your home are covered, then a home warranty may be a good option.

Let’s say your HVAC system breaks down and you don’t have a home warranty. It could cost hundreds, if not thousands, of dollars to repair or replace your system. A $300 home warranty offsets that expense and saves you from paying those expensive, out-of-pocket costs.

How long do home warranties last?

Most home warranties last for a year, though some companies will allow you to enroll in a multi-year plan if you pay upfront.

How can I renew my home warranty?

To renew your home warranty, contact your provider to begin the renewal process. Some companies will auto-renew the policy for you.

Who pays for a home warranty?

If you’re in the process of buying or selling a home, who pays for a warranty may differ. For example, if you’re a homeowner selling your house and already have a policy, you can transfer the policy to the new homeowners without a fee. However, those new homeowners will have to pay for the home warranty once the length of the current contract expires.

Additionally, real estate agents may pay for a home warranty if the seller doesn’t have one. This would make the sale more enticing to prospective buyers.

When can I buy a home warranty?

Whether you’ve lived in your home for years and decided to just now get protection or you’re buying a home and want to ensure it’s protected the second you sign, you can purchase a home warranty at any time.

Is a home warranty different from home insurance?

Yes, a home warranty is different from home insurance in that it covers major home systems and appliances whereas home insurance typically covers damage to your home due to natural disasters or theft.

The This Old House Reviews Team is committed to providing comprehensive and unbiased reviews to our readers. This means earning your trust through transparency and having the data to back up our ratings and recommendations. With that in mind, we spent time creating an objective rating system to score each home warranty company. Here’s what that process looked like:

We called every home warranty provider, talking to sales agents and company representatives. We got quotes, asked questions to fully understand the protection plan offerings, and evaluated the customer service.
We analyzed the sample contracts from each brand we reviewed. This allowed us to break down the industry jargon and see what was covered and not covered so we can give readers that information.

With all of that data, we created a rating system to score each home warranty company. Our rating system is a weighted, 100-point scale on the following factors:

Plan options: Every home and every family needs the right home warranty plan for them. Providers with more options and more flexibility were rated higher than those without.
Coverage specifics*: What does each plan and each provider cover? The more covered by the provider in their basic plans the higher the score.
Pricing*: Pricing, both the monthly fee and the service fee, plans an important role in the selection process.
Trustworthiness*: There are a number of home warranty companies out there which are not reputable and do not follow through on their agreements. We gauged trustworthiness based on customer feedback from multiple sources.
State availability: Where you live plays a role in the options you have for a home warranty. Companies scored higher if they had more states covered than competitors.
Customer service: This factor is scored based on our own research from calling providers as well as their guarantees for responding to claims.
Additional benefits: Some home warranty companies offer special promotions or will cover items that are usually optional coverage. Home warranty companies that offer these types of benefits were scored higher than competitors which do not.