What Is a Home Warranty?

Key Takeaways

• Home warranties fill in the gaps in homeowners insurance coverage. While homeowners insurance offers protection in a perilous event, home warranties can reduce the financial burden when your essential systems and appliances malfunction due to wear and tear. 
• Home warranties can reduce your out-of-pocket repair costs by splitting payments into monthly installments and paying out up to a predetermined cap for covered claims. 
• Enrolling in a home warranty can save you significant time and energy locating, vetting, and scheduling a reliable contractor near you.

How does a home warranty work?

Home warranties are similar to home insurance, in that you’ll have to file a claim and pay a deductible, known as a service call fee in the home warranty industry, to request service.

Compared to homeowners insurance, which typically has a big-ticket deductible between $500 and $1,000, home warranties have a more nominal fee––closer to $100 or less.

Once you’ve filed a claim, the warranty provider finds a licensed technician in their network and pays to have the system or appliance serviced or replaced up to the outlined coverage limit. The contractor will reach out to you to schedule at your convenience, but you can typically expect to hear from them within 48 hours. At your service appointment, the contractor will diagnose the issue and determine whether it’s a covered problem. 

Be sure to review your service agreement carefully so you’re aware of any potential exclusions and coverage limits. If the malfunction is a result of a covered issue, the contractor will arrange the next steps to order the necessary parts or find a comparable replacement.

What Do Home Warranties Cover?

Home warranties offer a lot of flexibility to choose the coverage and price point that makes the most sense for your needs. Most worried about your home systems? You can easily cover just those. More worried about your appliances? There are appliance-exclusive plans as well. You can also choose optional add-ons to further expand your coverage to items like your swimming pool and spa equipment. 

Every home warranty provider is different and every home warranty plan is a little different, so it’s important to compare plans. At Liberty Home Guard, we offer three plan tiers. We’ve broken down the coverage items in the table below. 

You can expand your coverage with as many optional add-ons as necessary. We offer a long list for ultimate customization:

• Pool/spa
• Additional spa
• Lawn sprinkler system
• Saltwater pool
• Generator
• Casita guest unit
• Electronics Protection
• TV mounting
• Pro-series appliances
• Central vacuum
• Stand-alone freezer
• Water softener
• Swamp cooler
• Second refrigerator
• Trash compactor
• In-fridge ice maker
• Free-standing ice maker
• Wine cooler
• Water dispenser water line
• Instant hot water dispenser
• Reverse osmosis system
• Limited roof leak
• Re-key services
• Gutter cleaning
• Pest control
• Window washing
• Exterior flooring power washing
• Plumbing and lighting fixtures
• Sump pump
• Well pump
• Ejector pump
• Grinder pump

Is a Home Warranty Required?

No, home warranties aren’t required. Some homeowners may opt to include them when they sell their home to provide the buyer with additional peace of mind, or your real estate agent may throw one in as a gift.

Learn more: Why You Should Request A Home Warranty

 A home warranty can help defray the costs of repairs or replacements, especially if you have multiple items break down in quick succession. While you pay be able to afford the out-of-pocket expenses if just your air conditioner breaks down, do you feel confident that you could comfortably afford the costs if your air conditioner breaks shortly after your dishwasher and not too long after that, you’re staring down the barrel of a malfunctioning garbage disposal?

If the answer is no or you sense your face go flush at the potential stress of the situation, you may find a home warranty is worth it after a simple cost-benefit analysis. 

How much does a home warranty cost?

The average home warranty plan has two main costs associated with it. First is the premium, or monthly fee. This is the fixed amount you pay each month or year to keep your plan active, but you may save money by prepaying for the year in advance. The price of the premium depends on both the company and specific policy. A plan with more expansive coverage or luxury coverage will have a higher premium. But for most plans, the premium ranges between $50–$60 per month, or around $600–$720 per year.

The second main expense is the service fee. The service fee is due only when you submit a claim to have something in your home repaired. A typical service fee is between $75 and $150.

You’ll also need to be mindful of coverage caps for the plan term and each covered item. A reputable home warranty provider will have a clear contract that you can keep around for reference. For example, your HVAC system may be covered up to $2,000, so if your repair costs exceed this limit, you’ll be responsible for the difference. 

Before agreeing to a policy, it’s important to have a frank discussion with your potential warranty provider so you can fully understand how much you’ll need to pay to protect your home. The goal, after all, is to spend less on warranty costs than you would have spent on home repair if you were not covered.

What is an extended warranty or service contract?

Most appliances, big and small, are protected by a manufacturer’s warranty for a limited time after purchase. A home warranty is a type of service contract.

A new refrigerator, for example, might have a limited warranty of one year, and if the refrigerator fails in that first year, the manufacturer will cover the cost of parts and labor required for repair.

An extended warranty or service contract is meant to prolong an appliance’s coverage when the manufacturer’s warranty expires. Some manufacturers offer their own extended warranties, service contracts, or protection plans. Others partner with third parties to underwrite coverage. Often, you can also find extended warranty coverage through home appliance warranty companies.

To be clear, a manufacturer’s warranty poses no additional cost for the consumer. An extended warranty, though, does require payment. This could be a one-time expense or a monthly or yearly fee.

How do home warranties differ from extended warranties or service contracts?

A home warranty and extended warranty operate on similar principles. With each, you are paying a modest amount of money to insure against the risk of expensive repair.

The main difference between a home warranty and extended warranty is the scope of coverage. An extended warranty covers a single appliance. A home warranty, on the other hand, can cover virtually every appliance in your home. Standard plans protect major kitchen and laundry appliances, but you can find coverage for electronics, generators, air conditioners—you name it.

You’d most likely know if you had a home warranty because you’ve either received paperwork or paid the fee. If you’re unsure about your coverage, reach out to your provider or consult these tips to find out if you have a home warranty.

How to choose a home warranty provider

While price is an obvious consideration when shopping for a home warranty, it should be only one of many factors that influence your decision.

Reputation and Customer Reviews

You should also compare home warranty companies by reading impartial reviews online. Find trusted, reputable companies and organizations, such as Google or the Better Business Bureau. When visiting review sites, check for advertising disclosures. Many review sites solicit financial compensation from the companies they write about, which leads to biased and specious rankings, so we recommend focusing predominantly on mid-range reviews to get a well-rounded understanding of the company’s reputation.

Disciplinary Action

Check that your potential warranty provider has not been accused of fraud or other illegal or unethical practices. And know that different states have their own laws and regulations that apply to the home warranty industry. You should confirm your potential provider is licensed to operate in your state. You can vet these issues by conducting a simple search into each company’s background, crowdsourcing information for your family and friends, and spending some time on the phone with customer service representatives before making your final choice.

Costs and Coverage Caps

Make sure you’re aware of all the costs associated with your potential plan, from the premium and service fee to the less obvious expenses,  such as costs beyond your coverage cap.  Discuss with your provider the different items and circumstances that are and are not covered by your policy. You should request a sample copy of the service agreement, so you can read through it carefully and ask clarifying questions.

Customization

Finally, the best home warranty company for you should be flexible. Take stock of everything in your home that you would like to protect. Identify appliances and systems that may still have coverage from a manufacturer’s warranty, builder’s warranty, or other guarantee. Your policy should provide coverage only for the items that need it.

Finding the right home warranty for you may take time, but you will be rewarded for your diligence.

The Verdict: Is a home warranty worth it?

The value of a home warranty largely depends on your financial situation. If you have a comfortable nest egg or emergency fund you don’t mind pulling from for home repairs, a home warranty may be less attractive for you. However, it can be a major tool if you are budget-conscious. It can also have a lot of value if you’ve recently purchased a home or moved to a new area where you don’t have a trusted contractor. 

The most important detail is that home warranties don’t cover accidents, misuse, or insufficient maintenance, so they will only be worth it if you take care of your covered items. To decide if a home warranty is worth it for you, take the time to read our regularly updated blog for home maintenance tips and explainers. We also recommend requesting a few quotes, reading the fine print, and asking questions before making a final decision. You can also learn more about the right home warranty for you by talking with our team. Call (866)-984-0340.