Home Warranty Coverage: Waste of Money or Worth it?

On average, home warranty coverage costs $300 to $600 per year, but that could be a small price to pay if it helps offset the cost of home repairs and appliance replacements.

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Updated May 13, 2024
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In a perfect world, the systems and appliances in your home would never fail, but in reality, home repairs are inevitable and can get expensive.

Just take a look at the numbers: The average furnace repair costs $131 to $477, and an air-conditioner repair could set you back $165 to $577, according to HomeAdvisor.

Home warranties are designed to help you offset repair costs by offering repair or replacement coverage for items that are included in the service agreement. If you’re wondering how home warranties work, what’s covered, and how much it’ll cost you, read on to learn more.

In this article

How does home warranty coverage work?

A home warranty is a service contract that pays for the repair or replacement of appliances or home systems when they fail. Typically, home warranties cover you for 12-month periods, but some builders might cover structural defects on newly built homes for up to 10 years.

If an appliance or system fails due to normal wear and tear while under home warranty, it could be replaced or repaired completely free of charge, but that’s not always the case. The terms of the home warranty could include claim caps, which is when the company covers only up to a certain dollar amount.

Typically, home warranty companies charge trade service fees each time a professional is sent to your home to make a repair. This fee can range from $50 to $100 per visit (or more in some cases), and it serves as your deductible for the service. You need to pay that fee first before the warranty kicks in to cover the repair.

What is typically covered?

Home warranty coverage can vary depending on the warranty provider you work with and the plan you choose. Here’s a general overview of what a home warranty might cover:

  • Ceiling fans
  • Central vacuums
  • Doors, drywall, and interior paint
  • Exterior wall coverings
  • Electrical system
  • Garbage disposals
  • Heating system
  • Air conditioning
  • Ductwork
  • Home appliances
  • Hot water heaters
  • Plumbing system
  • Smoke detectors

Keep in mind that some home systems and appliances may be covered under a home warranty but not within the terms of the primary contract. Instead, you might have to pay extra to include coverage add-ons. Add-ons could include coverage for a septic tank system or pool.

What isn’t typically covered?

Most home warranties have exclusions outlined within the agreement. If an appliance or system breaks that’s excluded from coverage, the warranty company won’t cover the cost. Although exclusions can vary, here’s an idea of what might not be included in a home warranty contract:

  • Cosmetic defects
  • Damage from mold, mildew, rot, or fungus
  • Fire sprinkler systems
  • Flues or chimneys
  • Radon monitoring systems
  • Roof repair
  • Septic tanks
  • Structural problems
  • Solar systems

Home warranties may also not cover certain repairs depending on the cause of a malfunction. For example, fridge repairs or replacements may not be covered if your kids or pets damaged it.

How do you get home warranty coverage?

You can typically get a home warranty as a new homebuyer. If you’re buying new construction, you may be offered a home warranty from the home builder, and you can purchase additional coverage through a separate company.

That said, home warranties aren’t just for new houses or new homeowners. You can also purchase a home warranty for an older home or several years after buying a new home as long as appliances and systems aren’t already broken. Before offering you a service agreement, the home warranty company may require maintenance records to ensure home systems and appliances work.

If you’re interested in purchasing home warranty coverage, there are several companies to consider, and you may be able to start the application online. American Home Shield offers various warranty plans that cover appliances and home systems.

America’s First Choice Home Club offers different coverage options that cover systems and appliances as well. American Residential Warranty has package bundles that cover major appliances, heating and cooling systems, and more. Each of these companies also lets you choose optional coverage for appliances and systems you might have, such as a pool, spa, or sump pump.

FAQs about home warranty coverage

Is a home warranty an insurance policy?

No — home warranty coverage and homeowners insurance are two different things. Homeowners insurance provides coverage for loss caused by an event, such as theft, fire, or natural disaster. To learn more about your options for homeowners insurance, check out our list of the best home insurance companies.

Home warranties are different from insurance; they are contracts where a company agrees to pay for the replacement or repair of systems or appliances that malfunction. Suppose your HVAC system stops working out of nowhere. A home warranty could help cover the cost of emergency home repairs (or a complete replacement) as long as coverage for it is included in your agreement.

Is home warranty coverage worth it?

Whether a home warranty is or isn’t worthwhile depends on the coverage you sign up for and the cost. If you choose a home warranty where repair coverage is limited, the warranty might not end up offsetting much of your upfront costs. That’s why it’s important to compare warranty options across multiple companies to see which will benefit you the most.

While shopping around, one thing to watch out for is coverage that sounds too good to be true. The Washington, D.C. attorney general’s office warns of home warranty schemes where salespeople overstate how much coverage is worth as a way to get customers to sign on the dotted line.

To avoid a scenario where your contract doesn’t cover all that was promised, ensure you understand the terms of your policy and work with a reputable company. You may also want to check the warranties for each of your individual appliances before purchasing a home warranty, as they might already be covered under manufacturers’ warranties.

How much does home warranty coverage cost?

The cost of home warranty coverage can vary depending on the package you choose and where you live. According to Consumer Affairs, the average cost of a home warranty is $300 to $600, which works out to $25 to $50 per month. Including add-ons to your contract could also add an extra $100 to $500 per year to your home warranty cost.

Those aren’t the only fees involved, though. When a covered appliance or system breaks, you might be charged a trade service fee whenever a technician is sent out to fix it. For example, American Home Shield charges $75 to $125 plus tax when a trade professional comes to your house for a service call.

Does a home warranty cover pre-existing conditions?

Usually, home warranty plans don’t cover appliances or home systems that have pre-existing problems. The warranty company could request maintenance records before offering an agreement to make sure everything is in decent condition, and you may have to wait for 30 days before you’re able to put in your first service request.

However, home warranty agreements may protect new homeowners from unknown or undetectable pre-existing conditions. Say the clothes washer is running normally during the home inspection when you buy a home, and then it stops working afterward. The washing machine might still be a covered item under the home warranty because you were not aware of the pre-existing problem.

Do home warranties cover roof replacement?

Home warranties don’t usually cover roof replacements. However, the cost of repairing a leaky roof could potentially be covered if you purchase a contract add-on.

For instance, American Home Shield offers roof leak add-on coverage, but there’s a claim limit — the company will pay up to $1,500 maximum per agreement. The average roof leak repair is $362 - $1,504, according to HomeAdvisor, so purchasing the add-on could be an effective way to minimize out-of-pocket costs.

The bottom line

After saving for a house and getting settled in, the repair costs that come with homeownership can start becoming hard on the budget. Home warranty service agreements could offer peace of mind and help pay for repair bills, providing the items you need to repair or replace are covered in the contract terms.

Because home warranty coverage can vary, it’s important to read through inclusions and exclusions so you don’t find out in an emergency that something isn’t covered.

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Author Details

Taylor Medine

Taylor Medine is a freelance writer who's covered all things personal finance for the last seven years. She enjoys writing financial product reviews and guides on budgeting, saving, repaying debt, and building credit.