A home warranty pays for repairs of common household systems and appliances should they fail due to use or wear and tear issues. They are like an insurance policy for common home repairs that could cost homeowners thousands if they didn’t have the home warranty.

A home warranty works very simply. Homeowners buy a warranty and pay for it either annually or monthly. If there is a problem with one of the covered items, the homeowner calls the home warranty company to put a service claim in. When making the claim, the homeowner will pay a trade service fee, a fee that is akin to a deductible, to schedule the appropriate repair technician out. The rest of the repairs are paid for by the home warranty company as long as it is a covered repair and below policy caps. 

What Is a Home Warranty?

A home warranty is designed to limit the costs that a homeowner might incur if they have to pay for home repairs on their own. The warranty pays to repair or replace systems such as electrical or plumbing or appliances such as refrigerators and furnaces. For the contract fee and a trade service fee, the home warranty company will send a technician to resolve the problem. 

Service is often done within 48 hours and homeowners can rest assured that they know their total out-of-pocket costs when dealing with repairs. 

What Does a Home Warranty Cover?

Home warranties cover systems and appliances. These are the major items in the house that aren’t covered for wear and tear by any other insurance or warranty. 

The major systems that a home warranty typically covers include: 

• Electrical
• Heating
• Interior plumbing
• Ductwork
• Water heater

The major appliances that a home warranty typically covers include: 

• Refrigerator
• Dishwasher
• Stove/Oven/Cooktop
• Garage door opener
• Garbage disposal

There may also be optional coverage for things like pool or spa equipment. 

What Does a Home Warranty Cost?

On average, home warranties cost around $550 annually. This cost may increase for policies that have optional coverage or are with top-tiered warranty companies that charge more. Remember that the monthly/annual fee is not the only charge you need to concern yourself with. Be sure to budget in the trade service fee which can vary from $30 to $125 per service call.

Is a Home Warranty Worth It?

It’s up to every homeowners to determine what is worth the money. For someone who doesn’t have large savings, knowing that you can pay a monthly fee with a trade service fee to deal with repairs can be a major stress-reducer. On the other hand, someone who is very handy or has the financial resources to pay for repairs on their own may not need the financial safety net of the home warranty. 

Keep in mind that while a home warranty will pay for most of the costs of repair, there are policy caps that may still leave a homeowner out-of-pocket for some higher-costing fixes. But for the most part, most homeowners find value when they use the home warranty and appreciate having a company that has vetted out service technicians to do the repairs for them.