Discover what a home warranty is, what it isn’t, how it works, and whether it’s worth it for you.
If you’re a homeowner (or thinking about buying a home) you’ve probably heard the term “home warranty”. But what is a home warranty? And what does a home warranty actually cover?
This guide to home warranties breaks down exactly what a home warranty is (and what it isn’t), how it works, what’s covered, what’s not, and whether it’s worth it for you.
What Is a Home Warranty?
Often confused with homeowners insurance, home warranties are usually one of the most misunderstood pieces of homeownership. By definition, a home warranty is a service contract that helps cover the cost of repairing or replacing major home systems and appliances when they break down due to normal wear and tear.
Home warranties are commonly purchased:
- By a home buyer at closing
- By sellers (for the home buyer) as a listing incentive
- Directly by homeowners at any point during their homeownership
Typically, new construction homes will have a builder’s home warranty included as part of the purchase incentive, which can transfer to new owners as long as the timeframe hasn’t expired. Otherwise, you can sometimes buy a home warranty from the builder later on, or another third-party company similar to how you would purchase an insurance policy.
Home Warranty vs. Homeowners Insurance
So, what’s the difference between a home warranty and homeowners insurance policy? Homeowners insurance essentially protects against unexpected disasters and problems, like flooding or a fire. This type of policy is usually required by mortgage lenders to get a home loan. A home warranty is designed to protect the day-to-day functionality of your home, covering repair costs for things like your air conditioner, water heater, or kitchen appliances. This policy is optional, but always highly recommended.
What Does a Home Warranty Cover?
Your coverage can vary by the provider and specific plan, but most standard home warranties include protection for major systems, home appliances, or both.
Common Systems Covered:
- HVAC units
- Main electrical systems
- Plumbing systems
- Water heaters
- Ductwork
Common Appliances Covered:
- Refrigerator
- Oven & range/cooktop
- Dishwasher
- Microwave
- Washer & dryer
- Garbage disposal
Many home warranty companies also offer add-on coverage for unique systems, like:
- Pool & spa equipment
- Well pumps & septic systems
- Deep freezers & secondary refrigerators
- Special electrical add-ons
What Is NOT Covered by a Home Warranty?
Unfortunately, home warranties do not cover everything. Like most protection plans and insurance policies, any problems you knew about before getting coverage won’t be covered. Also, problems that don’t affect the functionality of your home are typically excluded.
Common Home Warranty Exclusions:
- Pre-existing conditions
- Improper installation or code violations
- Cosmetic damage
- Structural elements (i.e. the roof, foundation, walls)
- Damage caused by neglect or misuse from the homeowner
Each home warranty has its own coverage limits and exclusions, so reviewing your specific contract details is essential.
How Long Does a Home Warranty Last?
The length of home warranties can vary depending on where they were purchased from. If you received a home warranty from the builder with the purchase of a new construction home, it can last from two to five years or longer (with various coverage limits). If you have a home warranty from a third party company on an older home, these typically expire annually. All home warranties will specify an exact policy start date and end date.
Can You Renew a Home Warranty?
Yes, most home warranties are renewable! Once your home warranty expires, you can choose to renew the existing warranty or establish a new one that better meets your needs as a homeowner. After the initial expiration, your home warranty will need to be renewed annually. Luckily, renewal costs are typically similar or less expensive than the original annual fee, but may increase slightly over time.
It’s recommended to renew your home warranty if:
- Your home has older systems or appliances
- You want predictable & budgetable repair costs
- Your manufacturer warranties have expired (on things like major appliances)
How Does a Home Warranty Work?
Similar to other warranty or insurance policies, you are usually required to submit a claim to receive your home warranty benefits. While every company and warranty is different (again, make sure you fully understand your specific contract) there are two different ways a claim is typically handled.
Option A:
- A covered home system or appliance breaks
- You submit a claim to your home warranty provider
- The warranty company sends a service provider or contractor to investigate the claim
- The provider repairs or replaces the item if eligible, with little to no out-of-pocket costs for you (You may be responsible for the service fee)
This is the most common claims process, as the home warranty company can better control the associated inspection and repair expenses. However, depending on the problem, it can take a little longer to get something fixed since you have to wait for the claim to be reviewed, a contractor to be scheduled, etc. But, this process does remove the stress of having to find and pay a credible contractor on your own—especially during emergencies.
Option B:
- A covered home system or appliance breaks
- You find an approved service provider or contractor to investigate the claim
- The provider repairs or replaces the item, with all expenses covered by you
- You submit a claim to your home warranty provider
- The warranty company reviews the claim and reimburses you, if eligible
This claims process is not as common, nor as beneficial to the homeowner. Unfortunately, there’s a lot of “fine print” you’ll have to pay attention to with this process to ensure that not only is your problem covered by your warranty, but also the contractor you chose. And while this process can mean quicker repair jobs, you should be prepared to wait a while for any reimbursement.
When choosing a home warranty, pay special attention to the claims process—if it’s confusing or requires a lot of additional work to use your coverage, it may be a good idea to consider a different policy.
Do You Need a Home Warranty?
Many homeowners (especially new homeowners) ask “Is a home warranty really worth it?” Our answer? Yes! While it doesn’t replace homeowners insurance or completely eliminate all repair costs, a home warranty can significantly reduce the financial shock of major breakdowns. This can be especially valuable if you’re a first-time home buyer or have a fixed/restricted budget.
A home warranty isn’t about covering everything—it’s about protecting what homeowners rely on most, every single day. When you understand what a home warranty actually covers (and what it doesn’t), it becomes a powerful tool for peace of mind, budgeting, and long-term confidence.
If you’re buying, selling, or simply want help deciding whether a home warranty makes sense for you, don't hesitate to contact us today. We're more than happy to answer any questions you may have!
Alexis Feezel is a results-oriented Marketing Coordinator responsible for developing, implementing, and overseeing all promotional strategies and activities to effectively market clients & listings and maximize sales.