What Is a Home Warranty?

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.

Think about that.

Having both policies offers total home protection for the unexpected.

In this article, the This Old House Reviews Team highlights the benefits of a home warranty, what it covers, how to purchase the right plan, and our recommended home warranty providers.

What Does a Home Warranty Cover?

In case you didn’t know:

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.

• System plans will cover whole-home systems such as air conditioning, heating, ductwork, electrical, plumbing, water heaters, garbage disposals, smoke detectors, ceiling fans, and doorbells.
• Appliance plans will cover major appliances such as refrigerators, dishwashers, ranges, ovens, stoves, built-in microwaves, clothes washers and dryers, garage door openers, and freestanding ice makers.
• Combination plans cover both systems and appliances. Some home warranty companies will also allow you to customize your plan and pick and choose the items you want covered.

Most companies will also provide optional coverage for miscellaneous items such as your pool, hot tub, spa, or second refrigerator. Customers can add these items to their plan for an additional monthly cost.

How Much Does a Home Warranty Cost?

Typically, a home warranty costs between $400–$800 annually.

Let’s dig a little deeper.

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 must pay a service call fee every time a technician comes to their house to assess the covered item. Most service fees cost between $75–$125, but some companies offer service fees as low as $60.

Don’t forget:

Before buying a home warranty plan, ask the company if any current promotions or discounts are available. Some companies, such as Select Home Warranty, offer promotions that give customers two months free when signing up.

Benefits of a Home Warranty

If you’re wondering how you might benefit from a home warranty contract, here are a few perks that the best home warranty companies offer:

• Saves homeowners money on expensive repair and replacement costs.
• Provides an easy way for homeowners to tackle repairs promptly.
• The home warranty company will send a local expert, meaning you don’t have to call around to find a repair technician.
• Home warranties can be a valuable real estate incentive if you sell your home.

How Does a Home Warranty Work?

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

If you’re 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.

Here’s what the process generally looks like:

1. A covered appliance or system breaks down due to normal wear and tear.
2. You call your home warranty provider to file a claim, or you can submit it online.
3. Once the company processes your service request, it sends a technician to address the broken item within 48 hours.
4. At your home, the technician looks at the system or appliance and recommends a repair or replacement. At this time, you pay your service call fee.
5. If the repair is minor enough and the contractor has the necessary parts, they can immediately repair it. If a replacement is needed, they’ll schedule a follow-up appointment to complete the replacement.

How Are Home Warranties Regulated?

Unlike insurance companies that must be licensed by The National Association of Insurance Commissioners and the Federal Insurance Office, federal laws don’t regulate home warranty companies.

According to the Service Contract Industry Council (SCIC), a national trade association that works with lawmakers across the country to develop uniform regulations to protect consumers, states regulate the home warranty industry under consumer protection laws. However, these laws and regulations vary from state to state.

For example, the Florida Office of Insurance Regulation handles home warranties in Florida, whereas the Texas Real Estate Commission regulates home warranty companies in Texas.

Additionally, some states may require a home warranty company to be licensed, while others will just require a company to register in the state. Licensing requires a provider to meet specific criteria, pass competency exams, or get certified before doing business in a state.

Registration may include completing a form and paying a fee to be an authorized provider in a state.

Still, it doesn’t necessarily require a company to get certified or meet certain standards before operating.

Because of the differences in state regulation—and lack of regulation in some states—some home warranty companies are scams and give trusted home warranty providers a bad name. Review our article on regulation for home service contracts for more information on how states regulate home warranty companies.

How To Buy a Home Warranty

Before purchasing a home warranty, consider a few factors to ensure you get the best protection plan for your home.

• Pick the type of plan you want. 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.
• Look at coverage caps. A home warranty provider sometimes places coverage caps on certain appliances or systems. This limited amount typically covers repair costs, but if your home item needs replacement, it might not cover the entire bill. For example, if your electrical system has a $2,000 coverage cap, you’re responsible for paying any amount past that limit.
• Think about the price you’re willing to pay. If you’re on a budget, plans below $50 a month may suit your preferences. Most companies will let you pay monthly instead of annual fees to make plans slightly more accessible for those who don’t wish to pay a large fee.
• Consider customer service. If an item breaks down in your home, you’ll want a responsive and helpful customer service team to help you fix it. The best home warranty companies offer 24/7 customer service and have an online portal or app where you can file claims.
• Learn about the company’s reputation. In a saturated industry, it can be difficult to determine which company is legitimate. When searching for a provider, look for one with 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:

• American Home Shield: With more than 45 years of experience, American Home Shield (AHS) is one of the most trusted companies in the business. Known for generous coverage caps and comprehensive coverage plans, AHS also lets customers choose between a $100 or $125 service fee. AHS doesn’t offer coverage in Alaska or Hawaii.
• First American Home Warranty: First American Home Warranty (FAHW) offers its First American Advantage upgrade with its comprehensive plans. It covers systems and appliances even if they were improperly installed, modified, or maintained. It also has a risk-free, 30-day money-back guarantee and provides solid appliance coverage. FAHW only offers coverage in 35 states.

We recommend getting a quote from both providers to compare your options and find a price that’s right for you.

Our Rating Methodology

The This Old House Reviews Team backs up our home warranty ratings and recommendations with a detailed rating methodology to objectively score each provider. We conduct research by speaking with company representatives, requesting quotes, analyzing sample contracts from each company, and conducting focus groups and consumer surveys. We then score each provider against our review standards for coverage, value, trustworthiness and transparency, availability, and customer service to arrive at a final score out of 100.  

To share feedback or ask a question about this article, send a note to our Reviews Team at reviews@thisoldhousereviews.com.