Key Takeaways
- A home warranty can help alleviate your financial burden if a major appliance or system like a refrigerator or interior plumbing fails.
- Home warranties are often purchased during a real estate transaction, but you can buy one directly from a home warranty company at any time, regardless of the age of your home or its condition.
- The warranty company typically connects you with its affiliated contractors, so you don’t need to worry about finding individual contractors on your own.
A home warranty offers coverage for the service, repair, or replacement of your key home systems and appliances. It serves as a financial safeguard if a costly item breaks down and can extend protection beyond the expiration of manufacturers’ warranties. The warranty provider links you with its network of approved contractors, allowing you to make a single call to address any issues with covered appliances or systems, eliminating the need to search for individual contractors. Additionally, a home warranty may provide an allowance to assist with the cost of replacement items.
Evaluating home warranty companies and their plans can be challenging without complete information. To assist, we’ve reviewed the best home warranty companies available today, examining their pricing, coverages, and state-by-state availability. For more details, visit our analysis of the top home warranty companies.
What Is a Home Warranty?
A home warranty is a consumer convenience product designed to help mitigate the risk of significant out-of-pocket expenses if an appliance or system fails. Unlike homeowners insurance, which serves a different purpose, a home warranty provides a specific kind of coverage. Generally, homeowners insurance covers property damage from perils like fire, theft, hail, wind, and vandalism, as well as liability for injuries to guests on the insured’s property.
Conversely, a home warranty protects appliances and systems that break down and aren’t covered by home insurance or a manufacturer’s warranty. Regardless of your home’s age or condition, you can buy a home warranty directly from a home warranty provider at any time. However, home warranties are most commonly acquired during real estate transactions, either by the seller to entice the buyer to finalize the deal or by the buyer for added peace of mind.
How Does a Home Warranty Work?
Here’s what the process of a home warranty claim involves:
- Your appliance or system breaks down due to normal wear and tear.
- You call your home warranty provider or submit a claim ticket online.
- The company responds to your claim and schedules service. With the companies in our rating, this response time is typically 48 hours, sometimes quicker.
- A technician visits your home to diagnose your malfunctioning appliance or system, recommending repair or replacement. You will pay the service fee at this point.
- If the repair is minor, the technician could perform it same-day. If the issue is more involved or requires a replacement, a follow-up appointment will be scheduled.
- Once your repair or replacement is complete, the process is over, and you can enjoy your freshly tuned appliance or system.
Are Home Warranties Worth It?
Pros:
- Covers older appliances
- Reduces out-of-pocket costs for repairs or replacement
- Helps sellers cover unexpected costs
Cons:
- Requires service fees each time a claim is made, on top of the monthly payment
- Doesn’t generally cover preexisting conditions
- Excludes outside contractors for the most part, depending on the company
Home warranties can be beneficial if your appliances are no longer covered by manufacturers’ warranties and you wish to minimize the out-of-pocket expenses for repairing or replacing costly items such as a refrigerator or furnace.
A home warranty can be a smart choice if you’re selling your home and seek financial protection against any item breaking before closing the real estate transaction. It can also be advantageous for homebuyers looking to cover unexpected repair and replacement costs after moving in.
However, common downsides to purchasing a home warranty are a lack of coverage for preexisting conditions and the inability to hire your own contractor.
The bottom line: A home warranty can reduce the financial burden of repairing or replacing costly items that weren’t in your budget. It also offers peace of mind and a centralized access point to local contractors. However, if you can afford the out-of-pocket expenses for repairs or replacements, a home warranty might be unnecessary.
What Does a Home Warranty Cover?
A home warranty provides service, repair, or replacement for major appliances and systems. It includes only the items specified in the contract and lists exclusions for which the consumer is responsible.
A systems plan typically includes:
- Electrical
- Ductwork
- Heating
- Air conditioning
- Interior plumbing
- Water heater
An appliance plan typically includes coverage for:
- Dishwasher
- Garage door opener
- Garbage disposal
- Oven/range/cooktop
- Refrigerator
You can buy a home warranty that covers just appliances, just systems, or both. Some plans are tailored for specific items. For instance, if you have manufacturer warranties for your refrigerator and dishwasher, but not for your washing machine or dryer, you might choose a plan that covers those items.
You can also buy add-on coverages, such as protection for pools and spas, electronics, high-end appliances, and well pumps. Some companies provide more optional coverages than others, so if you’re seeking additional protection, be sure to research this before purchasing a plan.
What Don’t Home Warranties Cover?
While the list of items covered by home warranties may appear extensive, the list of exclusions is often even longer. Generally, typical home warranties do not include coverage for the following:
- Preexisting conditions
- Improper installation and misuse
- Home appliance or system still under a manufacturers warranty
- Cosmetic defects
- Pest damage
- New equipment that’s been modified or changed
- Secondary damages (e.g., kitchen floor flood damage due to your dishwasher leaking)
Certain coverages, such as secondary damages, are excluded but may be included under home insurance policies.
What Should I Look for in a Home Warranty Company?
When choosing a home warranty company, you’ll want to review these four points, which can help you narrow down the features and coverages you need:
- Take an inventory of your appliances and systems. These are the big-ticket items in your home that can be costly to repair. Consider their age and condition, as well as the last service date and any preexisting conditions that could preclude coverage of a related mechanical failure in the future.
- Consider a home inspection. Preexisting conditions are tricky because if an appliance came with the house when you bought it, you might not be aware of its service history. To avoid surprises, consider a home warranty that requires a home inspection. This will provide documentation of any preexisting conditions and let you know what issues might not be covered.
- Consider coverage and payment amounts. Determine what you’d pay to repair or replace appliances and systems yourself. If you can afford these costs for particular items, you probably don’t need coverage for them. Keep in mind that a home warranty won’t always cover the entire cost of a repair or replacement, and many companies set charge limits, such as $1,500 for a refrigerator.
- Review home warranty company accreditations. Make sure to look for a home warranty company with a claims office in your area and review the company’s accreditations. For example, member companies of the National Home Service Contract Association(NHSCA) must comply with state regulations and have a call center available 24/7. Also, refer to the Better Business Bureau (BBB) for company reviews and information.
How Much Do Home Warranties Cost?
The most comprehensive home warranty plans from the companies we rated cost anywhere from around $600 to more than $1,000 annually. Service fees range from $65 to $150 across the providers. Some offer a single, fixed service fee, whereas others offer service fee ranges. Typically, companies that show service fee ranges allow for the selection of a higher service fee for a lower monthly payment, and vice versa.
Read the fine print to understand the exclusions, service visit fees, and charge limits. Plans vary, so it’s important to understand what goes into the overall cost.
If you’re looking for a discount on a home warranty, some companies will charge less if you pay for an entire year upfront instead of opting for monthly installments. Alternatively, a warranty company might offer a bonus month for the same price as an annual plan if you pay in full.
Are Home Warranties Tax Deductible?
If you buy a home warranty for your primary residence, it isn’t tax deductible on your federal return. The same is true for homeowners insurance. However, if you use a part of your house for a home office, you can deduct a portion of the home warranty. And, if the home is a rental property, the IRS allows a deduction for the home warranty.
Who Shouldn’t Get a Home Warranty?
If your appliances still have active manufacturers warranties, you won’t need a home warranty for those items. In fact, home warranty companies state in their contracts that items already covered by manufacturers warranties are excluded from their plans. Moreover, if you know an appliance or system is malfunctioning, was improperly installed, violates code, or hasn’t been properly maintained, a home warranty won’t cover repairs for those items.
A home warranty may benefit those who want financial protection in case appliances and systems malfunction when used as directed and after typical wear and tear. Essentially, if a covered appliance that was in good working order stops working unexpectedly, a home warranty can reduce the out-of-pocket expenses you’ll pay to diagnose and repair or replace it.
How Long Does a Home Warranty Last?
A typical home warranty lasts for a year with an option to renew, although some of the top warranty companies we rated offer one- to three-year plans.
Review your home warranty coverage annually because what worked for you last year might not be sufficient for the future. For example, the manufacturers appliance warranty might expire, or your air conditioning unit might be on its last legs. Also, consider adding coverage for items that you recently purchased. Your home warranty plan should evolve to meet your current needs.