What Is a Home Warranty? How It Works, What It Covers and What It Costs

A home warranty is a one-year (sometimes multi-year) service contract that pays to repair or replace covered home systems and appliances when they break down from normal wear and tear. You pay a premium, and when something covered fails you file a claim, pay a set service call fee, and the company sends a technician.

Home warranties are sold directly to homeowners and are also commonly bought during real estate transactions - often by sellers to reassure buyers.

Most companies build plans from two groups of items:

• Systems - heating, air conditioning, ductwork, plumbing, electrical and water heaters.
• Appliances - refrigerator, oven/range, dishwasher, built-in microwave, garbage disposal, clothes washer and dryer.

Many sell systems-only and appliances-only plans, a combination plan, and a premium tier with higher caps and extras such as roof leak repair or code-upgrade coverage. Pools, spas, well pumps and septic systems are usually optional add-ons.

When a covered item stops working, you file a claim online, in an app or by phone. The company assigns a contractor from its network (some plans let you choose your own with approval), you pay the service fee at the visit, and the technician diagnoses the problem. If it's covered, the company repairs it up to the plan's cap, replaces it if repair isn't practical, or sometimes offers cash instead. See our step-by-step guide to filing a home warranty claim.

Typical plans cost roughly $300-$700 a year, with premium tiers and add-ons costing more. On top of the premium you pay a service call fee - commonly $60-$150 - each time a technician visits. Prices vary by state, ZIP code, home size and the service fee you choose. Our home warranty cost guide breaks this down.

The most common exclusions are pre-existing conditions, damage from lack of maintenance or improper installation, code upgrades and permits (unless the plan includes them), and anything over the plan's coverage cap. Most new plans also have a 30-day waiting period. Read more in why home warranty claims get denied.

Homeowners insurance covers sudden, accidental damage - fire, storms, theft - and liability. A home warranty covers the slow, inevitable breakdown of systems and appliances. They cover different risks, and a warranty never replaces the insurance your lender requires. See home warranty vs homeowners insurance.

Ready to compare? See our home warranty rankings or reviews of Choice and American Home Shield.

This article is general information, not legal, insurance or financial advice. Coverage, prices and terms vary by company, plan and state - always read the full sample contract before you buy.