What Is Home Warranty And How Does It Work?

What is a home warranty?

Over recent years, many homeowners have opted to purchase a home warranty plan. That’s because of the level of protection it offers and the peace of mind that comes with it. Your home’s system and appliances can break down when you least expect, or when you may not have enough money to repair them or replace them.

This is where a home warranty comes in. If you have a home warranty plan, the home warranty company will send their technician or contractor to come and repair your appliance or system. So, what is a home warranty, and how does it work?

What is a home warranty?

A home warranty is a service contract that covers the cost of household systems and appliances if they malfunction as a result of age or the usual wear and tear. When you enter into the contract, you pay your annual or monthly premiums to a home warranty company and in return, you won’t have to pay a huge sum of money repairing or replacing your home appliances in case they stop functioning.

It’s worth mentioning that a home warranty isn’t the same as American residential insurance. That’s because home insurance covers the structure of your home against things, such as theft, fire, floods, and other natural calamities. Home warranty, on the other hand, covers your home system and appliances, such as HVAC, dishwasher, refrigerator, oven, etc.

A home warranty is especially crucial for people living in older homes with out-of-date electrical wiring, plumbing, HVAC systems, etc.

You should check out Choice Home Warranty reviews if you own an older home because the company doesn’t deny coverage based on the age of your home and it is also a good option if you want an affordable protection plan.


How does a home warranty work?

Similar to home insurance, you pay a monthly or annual premium to your home warranty firm to keep the service contract active. The home warranty plans differ when it comes to the types of coverage they provide, but in most cases, they operate just the same.

So, when your system or appliance breaks down due to age or wear and tear, the homeowner will contact the home warranty company to file a claim. Once the company has been notified of a claim, the company sends over a service contractor or technician to come and assess the damage and provide a report to the company.

At this point, the company will determine if the cause of the system or appliance breakdown is covered by the homeowner’s service contract. If the claim is approved, the company will send out a contractor or to repair or replace the appliance.

The home warranty company will then bill the homeowner a certain fee or deductible, which is usually between $60-$100 for the service.

What does a home warranty cover?

At this point, you may be wondering about the kind of appliances that are specifically covered by the warranty. Well, the appliances that are generally covered by the home warranty include:

  • Dishwasher
  • Refrigerator
  • Air conditioner
  • Oven
  • Garbage door opener
  • Garbage disposal
  • Washer
  • Dryer
  • Cooling system
  • Heating system
  • Plumbing

It is always advisable to confirm what is actually covered under your home warranty plan before you sign the contract. It is also important to read the fine print regarding any limitations to coverage.

What does a home warranty doesn’t cover?

You should note that not every malfunction or breakdown will be covered by the home warranty. A home warranty cover may not cover:

  • Outdoor items such as sprinklers
  • Items that were broken before the contract
  • Damage caused by malfunctioning appliances o systems

How much does a home warranty cost?

A home warranty usually ranges from $300-$600 on average. However, it is worth mentioning that pricing will depend on the level of coverage and the home warranty company. If you add numerous enhancements and upgrades to your plan, your annual cost could add up to $1000.

Other than the pricing of the plan itself, you will also be required to pay a service fee every time a contractor or technician is sent to your home for assessments or repairs. The service fee ranges from $60-$120, depending on the scope of the work that needs to be done.

If you are looking for a discount on a home warranty, some home warranty companies will charge you less if you pay for the whole year upfront instead of paying your premiums monthly.

However, having a home warranty does not mean that the homeowners will never spend a dime on repairs. Some problems won’t be covered by the warranty. That could be because the homeowner didn’t purchase a plan that covers the item, or maybe the home warranty company doesn’t offer coverage for such an item.


Are home warranties worth your money?

If you are still wondering whether a home warranty is worth your money, then keep on reading. But a home warranty is indeed worth your money. You could spend hundreds or thousands of dollars repairing or replacing your home systems and appliances. This can be quite challenging, especially if you don’t have money set aside for all these.

But if you have a home warranty plan, you won’t have to worry about having to dig deeper into your pockets to repair or replace your appliance because the home warranty will handle that. Another reason why home warranty is worth your money is that they offer coverage that covers a wide variety of systems and appliances, including HVAC, electrical, plumbing systems, oven, refrigerator, washer/drier, microwave, dishwasher, etc.

Lastly, having a home warranty offers homeowners peace of mind. It gives the homeowners assurance that their home appliances and systems are well protected. So, if an appliance breaks down, they have someone to help them out. All these factors make home warranty worth your money.

The cons of home warranty

One of the main drawbacks of a home warranty is that it won’t cover items that haven’t been properly maintained. This is also one of the main reasons for claim denial. For instance, if you are purchasing a home the previous owner didn’t maintain say a furnace, the current owner may find it difficult to cover the furnace. In addition to that, there are certain home warranty companies that may not cover certain home appliances in their coverage.

Who should buy a home warranty?

If you are buying a home that was previously owned by another person, you may consider having a home warranty plan from a reputable home warranty company. In addition to that, if you are living in an old house with an outdated electrical and plumbing system, then you also need to consider purchasing a home warranty. However, before you finalize a contract with a particular home warranty company, you need to understand the terms and conditions of the home warranty, what it will and will not cover, and how long the coverage will last.

Final thoughts

A home warranty is a crucial thing that every homeowner should think of. That’s because of the plenty of benefits that come with it. You will not only enjoy additional protection, but you will also enjoy the peace of mind that it offers. Besides, a home warranty can save you hundreds or thousands money on repairs and replacement. That’s why all homeowners need to consider having it.

But you need to be careful when choosing a home warranty company. There are plenty of them in the market and choosing one can be quite challenging. To select the right company, you can check its reviews on the internet and see what people are saying about them. You may also consider the number of years they have been operating because the more the years, the more experience they have. Lastly, you should know what you are signing up for. In this case, know the kind of items that will be under your coverage.