Home Warranty: A service contract that covers the repair or replacement of major home systems and appliances that break down due to normal wear and tear.
Homeowners most commonly encounter home warranties in one of two ways: as an offering from a seller during a real estate transaction, or as a policy purchased independently after closing. A typical plan may cover systems such as heating, cooling, plumbing, and electrical, as well as appliances like refrigerators, dishwashers, and ovens. When a covered item fails, the homeowner files a claim, pays a service fee (sometimes called a trade call fee), and the warranty company dispatches a contractor to assess and address the problem. Annual premiums can vary widely, generally ranging from a few hundred dollars to over one thousand dollars per year, depending on the level of coverage and the provider.
Watch for: Home warranties are not the same as homeowners insurance. Insurance typically covers damage from sudden events like fires or storms, while a warranty focuses on mechanical breakdown from everyday use. Exclusions matter considerably. Many plans will not cover items that were improperly installed, poorly maintained, or already showing signs of failure before the contract began. Reading the fine print on coverage limits, excluded components, and contractor assignment policies can help you understand what you are actually getting. Costs and terms vary by provider and region, so any figures mentioned here are approximate.
HomeRule provides general educational information only and is not a licensed contractor, insurer, or financial advisor. This entry does not constitute personalized advice.
See also: Homeowners Insurance, Closing Costs, Home Inspection