Are you wondering, “what is a home warranty?” If so, you’re not alone. Millions of Americans wonder this each year. And to answer your question, we’ve made the web’s best guide. Read on to learn more.
Disclaimer: REthority is supported by ads and participation in affiliate programs. We may earn a commission when you click our links. The information included in this post is for informational purposes only and should not be taken as legal or financial advice.
Jump to:
Buying a new home is a big deal. In fact, your home is one of the biggest purchases you’ll make in your lifetime, so covering all your bases on your investment is paramount. Enter the home warranty.
A home warranty plan is a service contract that helps to safeguard you, and your bank account, against the cost of replacement or repairs of major systems and appliances in your home.
For many people, home warranties are the key to new home maintenance, but they’re not right for everyone. Here’s what you need to know about home warranties to help you decide if getting one is the best choice for you.
What Is a Home Warranty?

First, it’s important to understand that a home warranty is not the same thing as homeowners insurance. It won’t help to replace your home in case something happens as home insurance will.
What a home warranty does do is protect major systems and appliances in your home as they get older. It’s simply there to help you save money if your furnace decides to kick the bucket, your air conditioning unit dies in the dog days of summer, or your water heater springs a leak.
Items usually covered include:
- Air conditioning
- Kitchen appliances such as dishwashers
- Doorbells
- Furnace / heating
- Water heater
- Ductwork (to code)
- Garbage disposal
- Inside plumbing stoppages
- Ceiling Fans
- Electrical systems
- Range and oven
- Telephone wiring
- Plumbing Systems
- Heating System
While these items are typically covered, certain policies may exclude specific items unless you buy a premium package or add coverage a la carte. For example, American Home Shield allows you to select certain coverage in addition to the general items.
How Home Warranties Work

When you decide to purchase a home warranty, you pay an annual premium that can range from a few hundred dollars to thousands – depending on how large your home is.
A standard warranty will normally cover a home up to 5,000 square feet. If you have a home larger than that, expect to pay more. Say something breaks in your home due to normal wear and tear.
If you want to replace it under the warranty, you pay the deductible. The amount you pay for your deductible varies according to the terms of your individual home warranty.
The normal range is somewhere between $50 and $125. After you pay your deductible, then the company you have purchased your home warranty through will send out a service provider to make the requested repairs or replace an appliance as needed.
The Pros of Home Warranties

Probably the biggest advantage to a home warranty is the peace of mind it can give you when it comes to home repairs. You know that if something breaks, then a professional will come to fix it.
That’s why home warranties are an excellent choice for people who aren’t DIY weekend warriors. We can’t all be handy, after all. It can also be a bonus for new homeowners.
If it’s your first time owning a home, you may not fully understand what goes into maintaining one. A home warranty can be sort of like training wheels.
It’s Like Training Wheels
As you adjust to the responsibilities of homeownership and learn how the systems in your home work along the way, the home warranty company has your back.
Home warranties are also a shrewd move if you like to keep a close eye on your budget or you’re a planner when it comes to your finances.
That’s because when you purchase a home warranty, there will be fewer unforeseen costs associated with your new home.
You know how much your premium and deductible are, but you don’t know how much a new HVAC system will cost. That makes it easier to roll with the new home punches.
A Few Drawbacks

Of course, there are a few drawbacks to think about when it comes to purchasing a home warranty. The biggest drawback is the home warranty coverage — not everything is covered.
Every warranty has specific terms that you must be sure to go over carefully to get an idea of what is excluded. A few common items that are often excluded include:
- Faucet repairs
- Permit fees
- Items broken prior to closing
- Pools and spas unless otherwise specified
- Garage door openers
- Outdoor items like sprinklers
If you read the small print of a home warranty closely, you may also see that things that aren’t properly maintained won’t be covered.
This is a huge pain point simply because the term “properly maintained” is so subjective, so it’s essentially saying that pre-existing conditions that existed before you purchased the home aren’t covered.
There Are Exceptions
Throw that in with the fact that you have no idea whether the previous owner properly maintained anything and you, as the new owner, can be left hanging.
Make sure this is spelled out clearly in the home warranty contract before you sign on the dotted line. Another sticking point is that if improper installation occurred, then it won’t be covered.
That’s why it’s important to have a home inspection done before you buy, it’s important to realize that you might very well be paying for something you never use.
You may have to simply file this in the “better safe than sorry” category of home ownership. A home warranty is something you could potentially only use once every five years, but you’ve paid the premium every single year regardless.
Best Home Warranty Companies
When selecting a home warranty company, you’ll notice a seemingly endless amount of options. While many companies earn a reputation for bamboozling money from clients, there are a few standout picks.
Best Overall Value
Our favorite value pick is Choice Home Warranty. Not only does their contract offer flexible terms, but they also are highly reviewed online. Learn more by getting a free quote now.
Customer Service Oriented
Our choice for best customer service is America’s Preferred Home Warranty. Not only do they have great online reviews, but the whole company is centered around providing ethical service for the customer. We love ethics, so we think APHW is a standout pick.
Largest Vendor Base
We love American Home Shield because of their massive vendor base. While smaller outfits use cut-rate vendors to save money, American Home Shield has a large vendor base. Additionally, they employ many in-house contractors to ensure your repair is done in a timely and professional manner.
Should You Buy a Home Warranty?
If you have maintenance concerns for your new home, then a home warranty can help to calm your fears, but it’s not a perfect safety net. Ultimately, you must decide whether it’s worth the investment for you and your family.
Before you take the leap into the wild world of home warranties, do your research. Carefully read over all the information of home warranties you’re thinking of purchasing to get an idea of what is and isn’t covered.
Then, make a personalized pros and cons list to help you decide. If you need more guidance on whether or not a home warranty is right for you, then your real estate agent is the perfect resource.
They have a lot of experience with new home buyers as well as with home warranties and can help to point you in the right direction.