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What to Know About Home Warranty Insurance

Jason Metz

Home warranty insurance typically refers to a contract that covers the repair or replacement of systems and appliances in your home, such as an electrical system or a stove. It’s usually a one-year contract with the option to renew each year, and it can help pay for repairs that homeowners insurance doesn’t cover.

Home warranty vs. home insurance

Home warranty insurance can fill in the coverage gaps of home insurance. It can cover a home’s systems (such as plumbing and electrical) and appliances for repair and replacement due to normal wear and tear, as well as malfunctions due to improper installation, bad repairs and mismatched systems.

Homeowners insurance helps you recover financially from damage inside and outside your home from problems such as fire, hail, lightning, tornados, theft, freezing pipes or even lawsuits if someone is injured in your home.

Mortgage lenders often require home insurance but they do not require home warranty insurance.

What does a new home warranty cover?

Depending on the home warranty company, you may be able to buy a systems-only plan, an appliance-only plan, or a combo plan that covers both. The items typically covered by a home warranty can include:

  • Appliances like dishwashers, refrigerators, stoves, washers and dryers.
  • Electrical systems.
  • Garbage disposals.
  • Heating and cooling systems.
  • Faucets and toilets.
  • Plumbing.
  • A water heater.

A home warranty typically does not cover:

  • The cost to bring out-of-code systems into compliance, like old electrical wiring.
  • Structural modifications.
  • Modifications to existing equipment.
  • Cosmetic fixes such as dents.

Are home warranty policies worth it?

A home warranty policy can be worth it if you bought a house with older high-ticket items like the HVAC system, water heater or refrigerator. A home warranty typically pays the full cost to repair or replace an item, but here are some things to keep in mind.

  • You’ll have to pay a “service call” fee. If a system or appliance needs to be looked at, you’ll be charged a “service call” or “trade fee” for a repairman to visit. The fee can be about $50 to $125, depending on the warranty contract.
  • You may not be able to choose your own repairman. Home warranty insurance companies often have pre-approved repair businesses they work with, like electricians, HVAC repair and plumbers.
  • You likely won’t get to upgrade replacement items. A home warranty policy may specify a replacement item as the same (or similar) make and model. For example, if an old refrigerator stops working, you can expect it to be replaced by the current make and model with similar features, but not an upgraded refrigerator with state-of-the-art features.
  • You may have to buy extra home warranty coverage for certain items. Standard home warranty policies typically don’t cover items like well pumps, septic pumps, stand-alone freezers, pools and spas.
  • Your home warranty plan may have a payment cap. For example, some plans have a $10,000 cap per claim and a $50,000 total yearly cap.
  • Coverage is limited to normal wear and tear. For example, if a hose on your dishwasher breaks because of normal wear and tear, it would be covered. But if you stand on your dishwasher door and break it, repair won’t be covered.
  • Pre-existing damage may not be covered. If an item was broken prior to you taking out a home warranty policy, it may not be covered. However, some policies might cover pre-existing damage if it was unknown or could not be “reasonably observed” by looking at or operating the system or appliance.
  • There’s typically a 30-day waiting period before you can file a claim. Most home warranty policies won’t allow you to request service until 30 days after the policy effective date. But if you purchased the home warranty as part of a real estate transaction, some policies allow you to request service on the day of sale closing.

How much does a home warranty cost per month?

Home warranty insurance costs around $25 to $70 per month, depending on where you live and how much coverage you need. Keep in mind, you’ll have to pay a service call fee if you request service, which can range from $50 to $125 per call.

Can I get a home warranty any time?

You can get a home warranty any time. If you want to upgrade or add coverage to a home warranty policy, you may have to do so within the first 30 days of the purchase date.

How long does a home warranty last?

A typical home warranty lasts for one year with the option to renew. You’ll typically receive a new contract about 30 days before the current one is set to expire. Some plans will automatically renew unless you cancel the home warranty policy.

Who sells home warranties?

Here are examples of home warranty insurance companies:

  • AFC Home Club
  • Amazon Home Warranty
  • American Home Shield
  • First American Home Warranty
  • The Home Service Club
  • Home Warranty of America
  • Landmark Home Warranty
  • Liberty Home Guard
  • Sears Home Warranty
  • Select Home Warranty