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How Does a Home Warranty Work?

Author Image Written by Dana Getz + 1 other Reviewer Icon Reviewed by Michael Mansueto Updated 06/20/2024

A home warranty is a contract that covers the service, repair, or replacement of major home systems and appliances. Think of a plan as a safeguard for when things go wrong with your home’s appliances and systems. A home warranty lets you make one phone call or request rather than take the time and effort to research local contractors for home repairs.

We listened to service calls, interviewed industry experts, and analyzed customer reviews to find the best home warranty companies. Plenty of jargon is involved with home warranties, so we recommend reading this guide to better prepare you for contacting providers.

What Is a Home Warranty Plan?

A home warranty is a service contract between you and a provider. The contract lists the home appliances (like refrigerators and clothes washers) or systems (like electrical and plumbing) that the provider will cover. If one of these systems breaks down due to routine wear and tear, you can file a claim with the company. It’s important to note that not all types of damage are covered under a home warranty. We’ll outline what is and isn’t covered in a later section.

Read more: Essential Information on Home Warranties

How Does a Home Warranty Work?

To qualify for coverage, the systems and appliances in your home need to be in good working order when you sign your contract, though it doesn’t matter how old they are. After you purchase a home warranty, coverage typically starts within 30 days of your first monthly payment. If a covered item or system breaks down, you can file a claim or service request with your provider. They’ll send a vetted technician to diagnose the problem, and if it falls under the terms of your warranty, they’ll schedule a repair or replacement.

Here’s what the process of using a home warranty looks like:

  1. First, a covered appliance or system breaks down due to wear and tear.
  2. Call your home warranty provider to submit a claim online.
  3. The home warranty company processes the service request. Once processed, the company sends a technician to your home. This step occurs within 48 hours, on average.
  4. The technician diagnoses the system or appliance at your home and recommends a repair or replacement. You must pay the set service call fee at this time directly to the technician.
  5. If the repair is minor enough and the contractor has all the necessary parts, they can repair it immediately. The technician will schedule a follow-up appointment if an entire replacement is needed. One service call fee is due per visit.
  6. Once the repair or replacement is complete, you can enjoy your newly functioning system or appliance.

What Does a Home Warranty Cover?

Home warranty coverage varies according to plan type. In general, there are three types of home warranty plans: systems, appliance, and combination plans. Most providers offer all three types.

System plans cover major home systems, including air conditioning, heating, ductwork, HVAC, plumbing, water heaters, garbage disposals, smoke detectors, ceiling fans, and doorbells.
Appliance plans cover most appliances, such as your refrigerator, dishwasher, range, oven, stove, built-in microwave, clothes washer and dryer, garage-door opener, and free-standing ice maker.
Combo plans cover both systems and appliances. Combination plans are the most popular, and home warranty companies often include extra perks with them.

Some home warranty companies offer custom plans where you can mix and match the items you want covered. Many providers also have optional coverage for miscellaneous items, such as your pool, hot tub, spa, or second refrigerator. Customers can add these items to their plans for an additional monthly cost.

What Does a Home Warranty Not Cover?

It’s important to note that home warranties won’t cover the cost of all repairs. If the malfunction is due to something other than wear-and-tear damage, the repair may not be covered. Below, we’ve listed some of the most common exclusions and limitations from contracts:

  • Preexisting conditions at the time a home warranty begins (including the 30-day waiting period)
  • Damage caused by improper installation or repair
  • Damage caused by insufficient maintenance
  • Accidental or purposeful damage
  • Cosmetic damages
  • Rust, corrosion, and sediment

A home warranty may not cover all parts of a covered item. Typically, only mechanical components are covered, so shelves, dials, grilles, and internet-based (“smart”) components aren’t protected. Providers also set payout limits called coverage caps on specific systems and appliances. Once you reach those limits, you must pay any extra costs out of pocket.

Since these exclusions and limitations vary by provider and home warranty plan, the most important step is to make sure you understand them before signing a contract. We interviewed 1,000 homeowners who had purchased a home warranty, and the key to satisfaction with the decision was understanding the fine print.

Daniel Cabrera, founder of Sell My House Fast, confirmed this idea: “Homeowners should understand what specific items, parts, or situations the company excludes from the warranty.” Look at a company’s sample contract online or ask questions of a representative before making your choice.

What Is the Difference Between Home Warranty and Home Insurance?

While both a home warranty contract and a home insurance policy cover your systems and appliances, they apply in very different situations. A home warranty is an optional policy that helps cover the costs of breakdowns from wear and tear. Homeowners insurance, however, covers damage from incidents like natural disasters, theft, vandalism, and acts of God.

Below are some sample situations that may be covered by either a home warranty or homeowners insurance. Note that home warranties only apply if the cause of the damage is normal wear and tear.

IssueHome WarrantyHome Insurance

Your appliances are damaged due to a surge caused by lightning.

An air conditioning system begins blowing warm air during operation.

Hot water isn’t running because your water heater has broken down.

A fire breaks out, leaving a few appliances inoperable.

The structure of your home is damaged during a severe storm.

Due to age and normal wear and tear, the washer and dryer begin malfunctioning.

How To Get a Home Warranty

If you’ve decided that a home warranty is worth it, start narrowing down the best possible protection plan for your home. You’ll need to identify a provider and the type of plan that best fits your budget.
Determine the type of plan you want: Some providers organize their plans based on the number of items covered under each one, while others divide coverage by the type of items, such as systems or appliances. Take note of the items you have in your home and weigh coverage options before buying a plan.
Look at coverage caps: Home warranty companies place coverage caps on certain appliances and systems. This amount tends to cover repair costs but may not be enough for an entire replacement. For example, if your electrical system has a $2,000 coverage cap, you’re responsible for paying any costs past that amount.
Think about pricing: If you’re on a budget, plans less than $50 a month will typically suit your needs. However, cheap plans tend to come with lower coverage caps. Also, pay attention to what service call fee you receive, as you’ll pay this amount every time a technician visits.
Consider customer service: Customer service is crucial to home warranties. In our survey, 37% of policyholders thought good customer service was the most important aspect of a home warranty. The best home warranty companies offer 24/7 customer service and an online portal or app where you can easily file claims.
Research the company’s reputation: Look for a provider with at least a B rating from Better Business Bureau (BBB). Read other third-party customer review sites, such as Yelp and Google Reviews, to get a good idea of what it’s like to work with that home warranty company. If you’re a homebuyer, ask your real estate agent for recommendations.

To help narrow down the best providers, we’ve reviewed 13 companies and read over 5,700 customer reviews. Based on this research, we recommend the following home warranty companies:

  • Liberty Home Guard: Liberty Home Guard (LHG) provides solid home protection via its three coverage plans. Each plan comes with a $2,000 coverage cap per covered system and appliance and a 60-day workmanship guarantee. Additionally, LHG offers over 30 add-ons to fully customize coverage. Read our in-depth review of Liberty Home Guard to learn more.
  • American Home Shield: American Home Shield (AHS) is one of the most trusted companies in the industry and offers robust coverage in 48 states. AHS lets you choose between a $100 and $125 service fee. It also covers types of damage that most other providers don’t, such as rust, corrosion, and unknown preexisting conditions.
  • Select Home Warranty: Select Home Warranty provides ​a low service call fee and budget-friendly premiums. It includes free limited roof-leak coverage with each plan, adding greater value. Select’s plans tend to cost $41–$47 per month. The company doesn’t service Nevada, Washington state, and Wyoming.

FAQ About How Home Warranties Work

What are the benefits of a home warranty?

A home warranty can cover expensive appliance and system breakdowns from wear and tear, which will eventually happen to even the most well-maintained items. Also, a home warranty can send professional service technicians directly to your home when you request service, saving time versus sourcing your own.

How often do I have to pay my service call fee?

You’re typically required to pay a service call fee each time you file a new claim. Reputable providers won’t charge an extra service call fee if your completed repair fails within 30 days. Certain providers extend their repair guarantee past the industry standard of 30 days.

Do home warranties cover broken home items?

All home warranty providers require items to be in working condition before offering coverage. If a covered item breaks after your initial waiting period, usually 30 days, you can file a claim.

How are home warranties regulated?

State government bodies and industry associations regulate home warranties. These institutions establish laws and codes of ethics that home warranty providers must follow when selling home warranty plans.

How long does it take for a home warranty to fix my issue?

Your home warranty provider’s response time may vary, but companies typically address claims within 48 business hours. However, scheduling a technician may depend on the technician’s availability.

Our Rating Methodology

We back up our home warranty ratings and recommendations with a detailed rating methodology to score each provider objectively. We conduct research by speaking with company representatives, requesting quotes, analyzing sample contracts, and conducting focus groups and consumer surveys. 

We score each provider against our review standards, which include four comparison categories: coverage, value, trust and transparency, and availability and service. We rate each provider across 31 factors within these categories. Each factor is assigned a point value based on its importance to a homeowner, totaling 100 points. We then convert the final scores to a 5-star rating. 

Here’s a breakdown of our weighted factors:

  • Coverage (40%): We scored coverage based on included home systems and appliances, add-on options, and unique benefits. We also compared coverage caps and policy exclusions.
    • Additional coverage items
    • Annual coverage cap
    • Home systems coverage
    • Major appliances coverage
    • Obstructed wall coverage cap
  • Value (30%): We compared the coverage level received to monthly pricing to determine plan value. We considered premium pricing, service fees, and flexibility in customizing plan costs.
    • Average monthly cost
    • Cost flexibility
    • Lowest service fee
  • Trust and Transparency (16%): We evaluated each company’s reputation using the Better Business Bureau ratings and customer reviews on third-party review sites. We read through plan change policies, workmanship protections, and sample contract availability.
    • Brand reputation
    • Policy change flexibility
    • Sample contract availability
    • Workmanship guarantee length
  • Availability and Service (14%): We award higher scores for faster claim processing and response times. We also considered service technician policies, including options to choose your technician.
    • Claims process
    • Guaranteed response time
    • Service flexibility

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