What Is a Home Warranty?

Home Warranties guard against unexpected home maintenance costs.

A home warranty may take the worry out of home ownership.

Ah, the joys of owning a home! You’re building equity, and you’re able to remodel or renovate anytime to create a place that’s truly yours. Of course, if a pipe bursts or the fridge goes on the fritz, you’re also responsible for the repairs. No landlord will magically fix things for you. So how do you guard against unexpected home maintenance costs? Consider getting a home warranty.

What is a home warranty?

A home warranty is a service contract designed to pick up where your homeowners insurance leaves off. It covers the costs of repairing or replacing certain items, such as appliances and air-conditioning, heating, and plumbing systems.

You may purchase a home warranty at any time, regardless of the age of your home. Some providers offer a discount if you do so within 30 days of closing.

What does a home warranty cost?

Typically, a basic home warranty costs $300 to $600 per year, or $25 to $50 per month. A comprehensive plan may cost more. Some companies also charge a fee for each service call, which usually ranges from $55 to $75.

When purchasing a home, some buyers ask the seller to contribute the price of a one-year home warranty toward the closing costs. Ask your real estate agent about writing this into your offer.

What is the difference between a home warranty and home insurance?

Both a home warranty and a homeowners insurance policy help pay for repairs related to unexpected breakdowns. A home insurance policy, however, generally doesn’t cover mechanical failures or problems caused by normal wear and tear. That’s where a home warranty comes in.

A home warranty is a service contract similar to a manufacturer’s warranty. But rather than covering just one product, a home warranty applies to various items in your home, including appliances and systems. If an item listed in your warranty breaks, your home warranty helps pay to repair and possibly replace it.

Homeowners are usually required by their mortgage lender to carry homeowners insurance, but buying a home warranty is optional.

What does a home warranty cover?

A home warranty may cover:

  • Appliances (refrigerators, stoves, dishwashers, washers, dryers, garbage disposals)

  • Central vacuum cleaners (major components)

  • Electrical systems (wiring, switches, panels, circuit breakers, ceiling and exhaust fans)

  • Heating and cooling systems (furnace and air-conditioning units and parts)

  • Hot tubs and pools (usually require specific coverage)

  • Plumbing (lines, faucets, valves, pumps)

How do I make a home warranty claim?

First, make sure you understand what your warranty does and does not cover. Next, contact your home warranty company to report the issue. (Have your account number handy.) If the problem is covered by your home warranty, the company will assign a service contractor to your case. The service contractor will contact you to schedule a visit and make the necessary repairs.

What if the repair or replacement doesn’t work?

If you aren’t happy with the service you receive, contact your home warranty company and ask for a remedy. If that doesn’t work, talk to your real estate agent, who may be able to talk to the company to reach a resolution for you.

How does the company decide between repair and replacement?

A home warranty typically pays for repair unless the cost of repair is greater than the cost of replacement. In that case, your provider may offer compensation to replace the item, usually at its depreciated value. You pay the difference between the old item’s depreciated value and current market price of a new item.

Can I cancel my home warranty?

Yes, you may contact your home warranty company to cancel your agreement. However, make sure that you understand your company’s cancellation policy. Your carrier may require a 30-day advance notice to cancel without a fee, for example.

Can you extend a home warranty?

Yes, you may extend your home warranty. Before you do, reassess your needs, which may have changed. Have you purchased new appliances? Are they still covered by their manufacturers’ warranties? Is there a more affordable home warranty plan on the market that better suits your needs?

When something breaks down, a home warranty can help protect your pocketbook. But before you sign up, make sure you understand the warranty’s limits, how much the company will pay to replace specific items, and any deductibles or service fees that you’ll be expected to pay. 

Whether you own or rent your home, protect your personal property with AAA Insurance.

Home Buying Definitions

The availability, qualifications, and amounts of coverages, costs and discounts may vary from state to state and there may be coverages and discounts not listed here. In addition, other terms, conditions, and exclusions not described above may apply, and total savings may vary depending on the coverages purchased. For more information regarding your eligibility for certain coverages and savings opportunities, please contact your AAA agent. Insurance products in California offered by AAA Northern California Insurance Agency. License #0175868, in Nevada by AAA Nevada and in Utah by AAA Utah. Insurance provided by CSAA Insurance Group, a AAA insurer.