Home warranties are typically not "insurance" but many people think of them that way.

A home warranty is generally a 12-month contract that covers repair or replacement of specific items in a home. This typically includes appliances (stove, washer, dryer and others), heating and cooling systems, plumbing and electrical systems, and possibly more.

What's usually covered by a home warranty

A home warranty can pay for repairs that homeowners insurance won't. For example, a warranty can cover appliances that stop working due to wear and tear. But like homeowners insurance, a home warranty won't cover pre-existing problems.

A home warranty usually has monthly premiums and deductibles. A basic home warranty plan can cost about $350 to $500 a year, according to Angie's List.

Warranties on appliances and mechanical systems (such as heating and cooling) might be sold as separate contracts.

If you do need to call for service under a warranty, you likely need to pay a "trade call" or "service call" fee. This could be about $50 to $125, depending on the contract. You'll probably need to call the home warranty company directly rather than choosing your own repairman.

Who buys home warranty insurance?

  • After buying a house: Some people buy home warranty insurance right after moving to a new home. They don't want to be hit with unexpected repair bills.
  • Selling a house: Some home sellers purchase home warranties for buyers in case anything goes wrong in the first year. Sellers might also buy a home warranty as an enticement to potential buyers.
  • Incentive from a realtor: Some real estate agents purchase home warranty programs for buyers as an incentive to close a deal.

Additional coverage options

If you have things that a standard home warranty plan doesn't cover, you may be able to buy extra home warranty coverage for:

  • Pools and spas
  • Well pumps
  • Septic pumps
  • Stand-alone freezers

Instead of spending money on a home warranty, you could create a savings account dedicated to repairs and purchases of new appliances.

Home warranties can be helpful but won't replace homeowners insurance. Home insurance is an important financial safety net for big disasters like a fire or tornado.