In recent years, home warranties have grown very popular with homebuyers and homeowners who are looking to protect themselves from paying for expensive home and appliance repairs down the line. But are they worth the money?

The answer is: maybe. Ultimately, it depends on the company issuing the warranty and the homeowner’s needs.

Home warranties are especially common in real estate transactions. A home warranty can help sell a house faster and for a higher price because it provides the buyer with protection against the unknown. Combined with a solid home inspector, a home warranty can give a homebuyer the level of comfort needed to seal the deal.

[See: 12 Home Improvement Shortcuts That Are A Bad Idea.]

What Is a Home Warranty?

For a set premium ranging from $350 to $500 or more per year, a home warranty company will issue a home warranty policy to a homeowner. In this policy, the company agrees to repair or replace certain appliances and major home systems if or when those appliances or systems break down.

If a breakdown occurs, the homeowner files a claim online or by phone. Then the company sends a contracted service provider, or has the homeowner call a professional on his or her own time. The homeowner pays a service fee – typically $50 to $100 for each repair. The service provider may fix the problem on the spot or may need to order parts and OK the repairs with the warranty company.

Depending on the policy, the homeowner may pay for the entire repair up front, then get reimbursed by the warranty company for the portion covered by the policy.

Should You Buy a Home Warranty?

When buying a newly constructed home, you probably don’t need a home warranty. Many states require the builder to repair defects in materials and workmanship for a few years – typically two to 10 years. And the new appliances in those new homes are almost always protected by one-year warranties.

Existing houses, however, may have considerable wear and tear, and tend to be equipped with older appliances. If the house is filled with over-the-hill systems that may require repair instead of replacement, a home warranty may make sense. Homeowners who think they’ll be able to upgrade appliances to newer and better models with coverage from a home warranty are usually disappointed to learn that’s outside their policy’s reach.

[See: 8 Types of Roads That Can Have a Big Impact on Home Sales.]

What Does a Home Warranty Cover?

A typical home warranty company offers more than one tier of coverage, depending upon price. A basic home warranty will cover a very specific list of appliances and systems such as the plumbing and electrical systems, heating and duct work, water heater, refrigerator, dishwasher, range or oven, built-in microwave, trash compactor and garbage disposal.

Some packages also cover the doorbell, burglar or fire alarm, ceiling fans, exhaust fans, central vacuum, washer, dryer and garage door openers.

An upgrade on your coverage, costing an additional $100 to $300, might include exterior pools and spas, septic tank pumps, sprinkler systems and well pumps.

Read the fine print when considering a home warranty – the devil is in the details. A home warranty probably won't cover anything that isn’t specified in your contract. And it may not pay for some of the covered items if certain conditions are not met.

For example: Most home warranties will not cover repairs that existed before the policy, and most have a 30-day waiting period. If you buy a house and something goes wrong with an appliance in the first 30 days, the warranty probably won’t cover it.

A home warranty may not provide coverage if an appliance was incorrectly installed or poorly maintained, or if it has been worked on before.

In addition, the entire cost of an expensive repair may not be covered. Many policies have a yearly limit – $1,500 to $2,500 per year, for example – and may have a deductible.

Finding a Reputable Home Warranty Company

Search “home warranty reviews” online. In the results, look for the review sites that don’t appear to sell advertising or leads to the companies they’re reviewing. Read through the reviews and pay special attention to the bad reviews (some warranty companies load some sites with false “good” reviews).

You’ll find home warranty companies vary in quality, but many are notorious for balking at service. If you work with the wrong company, it may drag its feet when you need a repair. If your home is without hot water, air conditioning, heat or electrical power, delaying repairs may force you to handle the problem yourself, which may be exactly what the warranty company is hoping will happen.

Be sure the home warranty company you choose is actually a company, not a local affiliate or lead-generation site. Search the company name online and make sure it has a real address, and note the contact information you’ll need if you have a problem.

Before you sign anything, ask whether you have to call the home warranty company to request a repair in order for it to be covered. If so, does the company have around-the-clock phone service?

Find out who will be providing repair services in your area. Large national companies are more likely to have an extensive list of service providers. Then check out the local service providers on online review sites to make sure they're reputable.

Ask a lot of questions before you sign up, and confirm all of the answers you receive in writing. Everything should be detailed in the contract. Watch out for contract wording like “at our sole discretion” or “we reserve the right.” These can be the first steps toward denying claims.

[See: 10 Ways to Save Energy and Reduce Utility Bills at Home,]

If you file a claim, get the name and contact information of the service person who comes to your home. Try to stay in the middle of the process so the warranty company can’t claim delays are caused by the contractor’s failure to send paperwork. Make copies of everything you receive and send them yourself via email, if necessary.

If you run into frustrating delays, tell the claims representative that you will be filing complaints with the Better Business Bureau and online review sites unless your case is passed to the “escalations team” or other supervisors. Get the names, direct phone numbers and email addresses of everyone you talk to.

Though many home warranty companies have less than stellar reputations, careful research and oversight can ensure that the policy you select is a worthy form of insurance against unforeseen repairs.

Don Vandervort is the founder of HomeTips.com.

Tags: real estate, new home sales, existing home sales, pending home sales, home improvements, housing


Don Vandervort is the founder of HomeTips.com, a leading home improvement advice site. Don has authored many home improvement books, written extensively for MSN.com, and served as a segment host on HGTV.

Recommended Articles

What to Know About Moving to California

Devon Thorsby | Jan. 15, 2020

No other state offers such a variety of places to live and job opportunities, but expect to pay more.

Which Home Is the Best Layout for You?

Devon Thorsby | Jan. 10, 2020

Before you buy or build a home, consider how the footprint and floor plan fit with your lifestyle.

Why You Should Sell Your Home in 2020

Devon Thorsby | Jan. 8, 2020

The housing market may not be as hot as in previous years, but selling now could be your best bet.

What to Know Before Renovating a Garage

Deanna Haas | Jan. 6, 2020

A garage renovation can add value to your home – here's what you should keep in mind before starting the project.

Best Interior Design Instagram Accounts

Devon Thorsby | Jan. 3, 2020

These interior design Instagram accounts offer advice, inspiration and resources to elevate your home design.

Is an Open House Necessary?

Wendy Arriz | Jan. 3, 2020

The traditional open house format is still popular, but whether it's effective in helping sell your home may depend on the type of property.

Hygge Decor Ideas for Your Home

Devon Thorsby | Dec. 27, 2019

Achieve the cozy feeling that embodies Danish hygge in your home design.

What to Know About Moving to Dallas

Devon Thorsby | Dec. 26, 2019

Before you decide to move to Dallas, explore all your options in this expansive metro area.

Options When You Can't Pay Your Mortgage

Lisa Larson | Dec. 24, 2019

Financial difficulty can leave you unable to pay your mortgage, but that doesn't always mean you're facing foreclosure.

What to Know Before Moving to Colorado

Devon Thorsby | Dec. 20, 2019

Get your hiking boots – and your wallet – ready for a new life in Colorado.

What Is the Cost of Living in Boston?

Dima Williams | Dec. 20, 2019

Here is what it takes to afford to buy, rent and live in the capital of Massachusetts.

Best Places to Live With Climate Change

Devon Thorsby | Dec. 18, 2019

See which metro areas are more resilient to changing climate conditions.

Housing Market Expectations in 2020

Devon Thorsby | Dec. 13, 2019

Low mortgage rates will help homebuyers afford property, while sellers won't see much reason to move.

Best and Worst Design Trends of the '10s

Robin Kencel | Dec. 13, 2019

Take a look at the 2010s fads that have transformed into staples, and others that are best left in the past.

What Is the Cost of Living in Seattle?

Devon Thorsby | Dec. 11, 2019

Here's a breakdown of what you need to be able to afford living in and around Seattle.

Is a Condo, Townhouse or Co-Op Best?

Steven Gottlieb | Dec. 11, 2019

Different forms of ownership have pros and cons, depending on how you plan to use the property.

Design Trends to Look Out for in 2020

Devon Thorsby | Dec. 6, 2019

Which design trends are on their way in, and which ones should you ditch in 2020?

What to Know About Moving to Nashville

Devon Thorsby | Dec. 4, 2019

Examine the details that can help you decide if you should move to Nashville, and what to expect when you get there.

Issues to Spot in a Final Walk-Through

Deanna Haas | Nov. 25, 2019

Both buyers and sellers should be aware of the issues that can arise during a final home walk-through.

Should You Buy a House With Cash?

Devon Thorsby | Nov. 22, 2019

Before you go all-in with your money, consider these caveats to paying for a home with cash.