Exploring the Essentials of a Homeowners Warranty

The cost of home ownership goes well beyond mortgage payments, insurance, and property taxes. You must also pay for leaky plumbing, fried wiring, cooktops that won't light, and refrigerators that suddenly feel warmer inside than an Arizona summer. 

You can cover those home repair expenses out of your pocket -- but you may not have to. If you have a home warranty plan, your warranty provider can shoulder some of the responsibility. 

Read on to learn the basics of home warranties, including what they are, what they cover, how much they cost, and the questions you should ask before purchasing one. 

What is a home warranty? 

A home warranty is a maintenance agreement that covers appliances and systems in a home you own. Most home warranty plans have a service dispatch model -- meaning when you have an issue, your provider sends a technician to help.

The technician diagnoses the problem and, hopefully, completes the repair. You pay a service fee directly to the technician, which is usually $75 to $125. If your warranty covers all aspects of repair, you pay no additional fees. 

One home warranty provider, Tend Home, does not provide service dispatch. Instead, you call a technician of your choice and pay for the repair directly. You then submit a claim to Tend Home for reimbursement, minus a per-claim deductible. 

What do home warranties cover? 

Home warranties cover appliances, in-home systems like plumbing and electrical, or both. The coverage usually pays for repair or replacement of covered appliances and equipment, based on the technician's recommendation. 

Home warranties have annual payout caps per appliance and per system. These commonly range from $2,000 to $5,000. 

What doesn't a home warranty cover? 

Home warranty plan contracts outline covered items and exclusions in excruciating detail. As a rule, you can always check the contract to understand which issues fall under your home warranty and which do not. Check that language carefully, as there may be exclusions you wouldn't expect. As an example, there are appliance plans that exclude your refrigerator or washer and dryer. You can see which ones in our detailed comparison of home warranty providers.

Most standard home warranties do not cover roofing, swimming pools, spas, septic tanks, freestanding freezers, and second refrigerators. Some providers will add these items to your plan for an additional fee, however. 

Another common exclusion is the cost of accessing certain equipment. Say your bathtub is leaking but has no access panel. If someone must break through tile, wall, or flooring to complete the repair, those costs are often your responsibility. 

What do home warranties cost? 

As ThisOldHouse reports, home warranties premiums range from $300 to $600 annually.¹ In addition, you'll pay a service call fee or deductible for each technician who comes to your home. 

Are home warranties worth it? 

Service provider marketplace Angi reports that average annual spending on home maintenance and home emergency projects in 2022 totaled $4,420.² If you spend $1,000 on home warranty premiums plus deductibles and get $4,000 or so worth of repair work, then, yes, it's worth it. 

The caveat is that home warranty plans often exclude common and/or expensive repairs. So, it's not realistic to assume that your plan will cover every home repair or home emergency project. 

Still, if you have an older home and your cash savings are low, a home warranty can be a useful and affordable budgeting tool.  

For what it's worth, I personally don't have a home warranty plan. I had one on my first home, but I didn't use it enough to warrant a renewal. Today, I save the premium equivalent to my emergency fund monthly to cover home repair projects. 

What questions should I ask before buying a home warranty? 

Before investing in a home warranty, do a walk-through of your home and review the inspection report you received during escrow. Identify the home's at-risk appliances and systems. Any plan you buy should cover at least cover those items. 

Questions to ask your provider (or answer yourself by reading the contract) include: 

• Which appliances and systems does this warranty cover? What are the payout limits on those items? 

• What are the excluded repairs on covered appliances and systems? (These can be extensive, so plan on reading the contract for this information.) 

• What are the excluded appliances and systems? 

• What is annual payout cap? 

• What is the service fee or deductible? 

• Do you have 24-hour dispatch? 

• How long does it take to get a technician to my home? 

• Are repairs guaranteed? 

• When do you pay for appliance replacement?

How home warranty providers compare

You may add more questions to that list after reviewing our detailed comparison of eight top home warranty providers.(ADD LINK) The providers covered are: American Home Shield, Choice, Cinch, Fidelity National, First American, Liberty Home Guard, Select, and Tend Home. And the points of comparison include: 

• Different plan types 

• Notable exclusions across providers 

• Unique plan features across providers  

• Trade service fees and policy limits by provider and plan  

Tend Home warranty review 

You'll also want to see our review of Tend Home warranty plans. As noted, Tend Home manages its warranties differently vs. the rest of the industry. The payout limits and per-claim deductibles are higher, but you choose your own provider. 

Our review includes detail on the deductibles, coverage limits, premiums, waiting periods, and main exclusions for Tend Home plans. You'll also learn how the claims process works and what Tend Home's customers have to say about the customer service they've received.