How Does a Home Warranty Work? (2024)

By Ross Bentley | May 7, 2024

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A home warranty reduces the hassle of an unexpected appliance breakdown, plumbing leak, or electrical problem. If your air conditioner breaks in the middle of summer or your garage-door opener malfunctions, your home warranty provider will connect you with a qualified technician and help cover repair or replacement costs.

If you’ve ever filed a home insurance claim or taken advantage of a product’s manufacturer’s warranty, you’ll be glad to learn that home warranties work similarly. Still, it helps to familiarize yourself with the specifics so you can decide whether a home warranty makes sense for you. In this article, we’ll explore the ins and outs of how home warranties work and provide our top provider recommendation.

What Is a Home Warranty?

A home warranty is a contract between a homeowner and a service provider. The homeowner pays a certain amount each month or year, and in exchange, the provider agrees to arrange service for covered items when they break down due to normal wear and tear. The warranty company will also help cover repair or replacement costs. Home warranties can cover most, if not all, of the major systems and appliances in a home, though some items may cost extra to cover.

How Do Home Warranties Work?

When you purchase a home warranty, you have two costs to consider: The first is the monthly or annual premium. This is the amount you must pay to maintain your coverage, similar to the premium you pay for home or car insurance. The second cost is the service call fee. This is the amount you must pay when a service technician visits your home. 

When a covered item in your home breaks down, you can file a claim with your home warranty provider. Most companies provide 24/7 phone support for their claims process and allow you to file a claim either online or over the phone. Regardless of how you file your claim, you will need to answer a few questions about the issue. Assuming the issue is covered by your warranty, the company will schedule a service appointment on your behalf.

Each home warranty company has its own network of prescreened technicians, one of whom will be dispatched to diagnose and resolve your issue. However, some companies also allow you to choose your own technician. This can be beneficial if you already have a plumber, electrician, HVAC technician, or appliance repairperson that you trust.

Once the technician has diagnosed the issue, they will obtain approval from the warranty company to complete the required service or repair. In some cases, a full replacement may be needed. Unless the cost exceeds your policy’s coverage limits, you will only be responsible for the service fee specified in your contract. If you hired your own technician, you may need to pay the entire amount up-front and request reimbursement from your home warranty provider.

Do I Need a Home Warranty?

If you live in a new-construction home covered by a builder’s warranty with brand-new appliances covered by manufacturer’s warranties, you may not need a home warranty right away. However, in an older home with dated appliances, a home warranty may come in handy.

You might also benefit from a home warranty in the following situations:

What Does a Home Warranty Cover?

Some home warranties only include appliance coverage, while others exclusively cover major home systems. A comprehensive home warranty will cover both categories, including the following:

In addition to the appliances and systems listed above, some home warranty plans cover roof-leak repair, garage-door openers, doorbells and chimes, instant hot and cold water dispensers, ice makers, and trash compactors. Add-on coverage may also be available for pools, guest units, electronics, lawn sprinkler systems, sump pumps, and other items.

What Doesn’t a Home Warranty Cover?

To understand what your plan does not cover, read the fine print in your home warranty contract and look for exclusions and coverage limitations.

Exclusions are any items, components, or issues your home warranty specifically states it will not cover. Generally, home warranties only cover issues that arise from normal wear and tear. They are meant to supplement home insurance, which covers the structural elements of your home and damage caused by one-time events. Home warranties typically exclude the following:

The home warranty company may also place limits on the dollar amounts it will pay for certain items or categories. For instance, your warranty may specify that it only covers up to $3,000 per appliance, or it may cap its roof-leak repair coverage at $10,000. If the cost of a repair or replacement exceeds the coverage limitations stated in your policy, you will be responsible for paying the difference.

How Do I Choose a Home Warranty Company?

As you research the best home warranty companies, you will notice a few key similarities and differences among the various plans and providers. For instance, most providers offer two or three plans plus a handful of add-ons. Plans are fairly standardized in terms of which appliances, systems, and components they cover. However, premiums and service call fees will vary, as will exclusions and coverage limitations.

Here’s what to consider as you decide which home warranty company is best for you:

Our Top Home Warranty Company

American Home Shield (AHS) is our top recommendation for those seeking a comprehensive home warranty plan. AHS covers several items and issues that competitors exclude—from undetectable preexisting conditions and improper installations to duplicate appliances. The company does not exclude items based on their age or maintenance history either.

AHS customers can choose from three coverage plans and two service call fees ($100 or $125). Monthly premiums vary depending on your location and the service fee you choose. A higher service call fee will result in a lower premium, and vice versa. Below is a summary of the plans available from AHS:

None of AHS’s warranties have a dollar limit for systems coverage. AHS also offers add-ons to cover your electronics, pool or inground spa, guest unit, septic pump, and well pump. Roof leak repair is available as an add-on to the ShieldSilver or ShieldGold plans.

Learn more: American Home Shield Review

Get a quote: Get your quote from American Home Shield

Our Recommendation

Home warranties cover your home’s major systems and appliances. You pay a monthly or annual premium in exchange for coverage of the items listed in your chosen plan. If an item breaks down, you must file a claim with your provider. Then, a vetted technician will come to your home to assess the issue. Once approved, the technician will repair or replace the item, and you will only owe them a predetermined service call fee.

Although American Home Shield is our top recommendation, homeowners have several reputable home warranty companies to choose from. To ensure you get the best deal, gather quotes from multiple providers. Compare the premiums and service call fees each company offers, plus their plans’ coverage limits and exclusions.

Read through your final contract carefully before signing to ensure you understand all the terms. It’s also worth researching the claims process ahead of time so you know what to do and what to expect when something breaks.

How Home Warranties Work FAQ

Do home warranties actually cover anything?

Home warranties don’t cover everything, but they do provide valuable coverage for most major appliances and home systems. A good home warranty can help cover repair or replacement costs when a breakdown occurs due to normal wear and tear.Just remember that not all home warranty plans cover both categories; some provide systems-only or appliances-only coverage. Even comprehensive home warranties may differ slightly in what they cover.

What are the cons of a home warranty?

The exact cons of a home warranty depend on the plan and provider you choose. Here are a few potential downsides:Coverage limitations and exclusionsNo guarantee coverage will be usedLess control over the timing of repairsService call fees

What is the benefit of having a home warranty?

The benefit of having a home warranty is threefold. First, it can save you money by covering most of the cost of fixing your home’s systems and appliances when they break down. Second, it connects you to a prescreened network of qualified technicians who can diagnose and address your issue. Third, a home warranty can provide peace of mind for both new home buyers and seasoned homeowners.


How We Chose the Top Home Warranty Providers

Our team reviewed and researched dozens of home warranty providers, thoroughly analyzed sample agreements, and identified customer pain points based on analysis of customer reviews and interviews with industry experts. Our in-depth methodology guides our review process to provide transparent information about the companies we review.

During this process, we determined that the most critical aspects of a home warranty company include available service plans and add-ons, depth of coverage, plan cost, industry reputation, customer support infrastructure, and additional features. We also focused on the ability to choose your own contractor, upgrade your coverage package, transfer your plan to another owner, and cover roof leaks, high-end appliance brands, ceiling and exhaust fans, and faucets and fixtures.

Our research supported that plan coverage should carry the most weight, with customer support as the second-most important factor. Industry reputation, plan availability, and additional features were rated equally. We determined that price range, while worth considering, should not be the primary basis for choosing a home warranty provider for your home’s needs.