Home Warranties FAQ: Definition, Benefits, Costs, Exclusions & Limits

October 5, 2023

Buying a house is a big event; for most people, it is one of the most exciting purchases they will ever make. An expensive repair bill, however, can quickly dash the joy. Many buyers will hire a home inspector to avoid being saddled with unforeseen repairs after closing. 

While a brilliant idea, home inspections are usually visual, and they cannot guarantee that a critical system or appliance won’t fail once you move into your new house.

A home warranty can help defray the costs of repairing or replacing covered systems if something breaks. Following are a few frequently asked questions about warranty protection, and check them out before purchasing your next home.

What Does a Home Warranty Cover?

Some potential areas of coverage might include:

  • Major appliances
  • Plumbing systems
  • Garage door openers
  • Heating
  • Ventilation
  • Air conditioning systems
  • Electrical systems
  • Ductwork

Why Get a Home Warranty in the First Place?

Even though it does not guarantee that a homeowner will never have to pay for any repairs, it provides peace of mind, especially for a new owner. The purchase of a house leaves many buyers with very little cash for costly, unexpected repairs. Avoiding expensive breakdowns is not the only benefit. However, it is arguably the most important.

Many warranties also include help with finding a contractor. A buyer will only need to make a phone call to the warranty company to establish their claim. The warranty company will dispatch a trusted, licensed, and insured contractor with the experience and resources to complete the project. Promptly locating a reputable contractor is more than a convenience. 

It can help the homeowner avoid the risk of potential delays and increased expenses associated with unlicensed or dishonest repair companies.

Additionally, home warranties limit an owner’s risk of prolonged wait times to schedule a technician and excessive service call fees. The warranty company typically negotiates a nominal service call fee and agreeable response times in advance. For many types of repairs, a quick response may save a homeowner more than the cost of the annual fee.

What Are the Costs?

Possibly no initial cost – There may be no initial cost to buy a home warranty for some home buyers. Many smart sellers provide this at no additional charge. Buyers and sellers both enjoy added protection and confidence in the deal.

If the seller does not offer a warranty, buyers can still enjoy these benefits by purchasing a home warranty from a reputable company.

  • Annual fee: Usually, there is a yearly fee based on the coverage chosen. This fee typically ranges from $300 – $600 per year. With some plans, the cost also includes annual maintenance or inspections.
  • Service call fee: A service call fee is due once a technician checks out the covered item. This fee is usually about $75 – $125.

In most circumstances, except for the service call fee, the cost to repair or replace the appliance or system is completely covered. A homeowner may save enough money on a single claim to pay the annual fee.

What Are the Coverage Levels?

Coverage levels vary by company. Most insurers offer multiple tiers to allow homeowners to choose their preferred level of protection. Carefully review the options to ensure that you receive the coverage that best fits your needs.

  • Primary or basic level coverage usually includes normal wear and tear of major systems such as heating, plumbing, air conditioning, electrical, most major kitchen appliances, water heaters, and garage door openers.
  • Premium coverage might expand covered items to include garage doors, pool/spa equipment, and washers/dryers.
  • Optional coverage – there may be an option to elect coverage for specific items for an additional fee.

What Are the Exclusions and Coverage Limits?

No warranty program will cover everything in your home, and some exclusions will apply. Following are a few provisions to look for in your warranty agreement:
Structural issues
Secondary damage
Toxic materials
Manufacturing defects
Coverage limits for common areas in condominiums
Coverage limits for multi-family houses and townhouses

Marian Sahakyan

Marian Sahakyan is a content writer and a journalism graduate from California State University, Long Beach with a background in marketing as well as UI and UX design. Marian’s previous writing and reporting has been featured in several community newspapers throughout Southern California.