What Does a Home Warranty Cover?

You may have questioned what a home warranty covers if you own a home. Here's what you can anticipate from a warranty, whether you recently purchased a property with one or are considering acquiring one for a home you currently own.

KEY THINGS TO KNOW 

• A house warranty is not the same as a home insurance policy.
• Home warranties cover the repair and replacement of household appliances and systems at a reduced cost.
• Most home warranty companies offer separate plans for appliances and systems, as well as hybrid plans that cover both.
• You pay a monthly or annual fee for a house warranty. In exchange, you will be charged a fixed service call price each time an appliance or system fails.

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What Is a Home Warranty and How Does It Work?

Most homeowners are aware with homeowner's insurance, which protects your home's structure and personal items against theft, fire, weather, and liability claims. Home warranties safeguard your investment as well, but they operate in a different way.

A home warranty is a service contract that assists in the repair (or replacement) of specific appliances and systems. In exchange for a monthly or annual cost, you pay a predetermined service call fee whenever your washing machine, refrigerator, HVAC system, or other appliance breaks down unexpectedly.

What Is Covered by a Home Warranty?

A home warranty covers covered household appliances and systems and offers subsidized repair and replacement services. It doesn't matter if your home is brand new or decades old; you don't need to furnish maintenance records or have an inspection to obtain coverage.

Most home warranty companies offer separate plans for appliances and systems, as well as hybrid plans that cover both. Here's what an appliance plan might cover, depending on the company and the plan you choose:

• Attic fans - Garbage disposals
• Bathroom exhaust fans - Instant hot water dispensers
• Built-in food centers - Kitchen fans/exhaust hoods
• Built-in microwaves - Ranges/ovens/cooktops
• Built-in trash compactors - Refrigerators
• Dishwashers - Refrigerator ice makers
• Freestanding ice makers - Wall ovens
• Garage door openers - Washers/dryers

Repairing or replacing appliances can be costly, but when a major household system fails, it can result in considerable financial difficulties. The good news is that home warranty insurance, whether purchased separately or in conjunction with an appliance plan, cover systems. The following systems are commonly covered under these programs (depending on the firm and plan you choose):

• Attic fans - Humidifiers
• Built-in whirlpools/jetted tubs - Interior electrical
• Burglar and fire alarms - Plumbing (excludes fixtures)
• Ceiling fans - Re-key services
• Central air conditioning - Smoke detectors
• Central home heating - Sump pumps
• Central vacuums - Telephone lines 
• Doorbells - Toilets
• Ductwork - Water heaters

The regular plan offered by a provider may not cover all of the appliances or systems in your home. Most providers, however, offer add-ons that allow you to receive the coverage you require—at an additional fee, of course. Here are some of the most frequent add-ons offered by home warranty companies:

• Extra air conditioners - Pools/saltwater pools
• Extra hot water heaters - Septic systems
• Extra ranges/ovens/cooktops - Spas
• Extra refrigerators and freezers - Stand-alone freezers
• Electronics - Sump pumps
• External water or sewer lines - Tankless water heaters
• Faucets and fixtures - Water softeners
• Food loss - Well pumps
• Guesthouses - Whole-house humidifiers
• Lawn sprinkler systems - Wine refrigerators

Home Warranty Coverage Limits 

Annual coverage limits will determine how much the firm will pay to diagnose, repair, and replace each covered item, regardless of what your home warranty plan covers. Of course, these coverage restrictions differ drastically from one company to the next. One home warranty plan may limit coverage to $500 per appliance, while another may cover up to $5,000 per item. Sometimes contracts include different caps for different items, such as $500 for the washing machine and $1,000 for the plumbing.

Remember that the plans have aggregate limitations, which are the total amount the firm will pay for all insured losses in a given time period (usually a year). For example, the plan might cover up to $5,000 per item, with a total of $15,000 for all claims. 

What Don't Home Warranties Cover?

While many appliances and household systems are covered by home warranties, other products are typically excluded. These could include (but are not limited to) the following:

Solar systems and components Structural concerns, foundations, walls, paint, and flooring Commercial-grade equipment or systems, such as Bosch, GE Monogram, Sub-Zero, Thermador, and Viking Anything a home inspector has previously discovered (because you already knew about the problem).

Repairs related to improper maintenance, installation, design, manufacturer defect, or previous repairs (outside of the contract) Preexisting conditions and normal wear and tear Problems with rust, corrosion, and sediment Nonessential components, which include items that covered items don't need to function, such as oven racks, remote controls, clocks, and timers

Hazardous contaminants, such as asbestos, radon gas, and mold, are identified, detected, abated, and removed. Services to address building and zoning code breaches are also provided.

The Bottom Line 

For most people, a home is their largest single investment. When combined with a solid homeowners insurance policy, a home warranty can be a great method to protect your investment. Home warranties and homeowners insurance work together to give you peace of mind and protect you from potentially severe financial losses.

If you're thinking about getting a home warranty, make sure you read the contract thoroughly before signing. Make it a point to learn what is and is not covered, as well as how the coverage restrictions work. That way, if one of your appliances or household systems breaks down and has to be diagnosed, fixed, or replaced, you won't be surprised.