Repairs are an inevitable part of living in a home, regardless if you own or rent one. Appliances break, faucets leak and HVAC units can stall in the middle of a heatwave. Rather than deleting your savings for these repairs, some people purchase home warranties to alleviate the cost of common home repairs.

However, are home warranties worth it for homeowners or renters? Learn more about what a home warranty is, when someone should purchase it and whether a home warranty is right for you (as well as what the best home warranty companies offer).

What Is a Home Warranty?

Home warranties are renewable home service plans that provide discounted repair and replacement services for covered household appliances and systems. Contract terms vary, and coverage depends on the type of warranty you purchase. It does not provide the same coverage as homeowners insurance, so it’s important to know the difference between home warranties and home insurance.

Homeowners’ insurance protects policyholders against damage to personal property and the home’s structure, such as fire damage or theft.

What Is Covered in a Home Warranty Policy?

Home warranties are a complement to home insurance. Depending on what level of coverage you purchase, most plans will typically cover most major components of large home systems, such as your HVAC, water heaters, plumbing and electrical. Some plans cover appliances such as washers, dryers, refrigerators and stoves. You can also purchase optional add-on coverage for your spa, second refrigerator, swimming pool, pumps, septic systems and more depending on how much you can pay for a home warranty.

How Does a Home Warranty Work?

Home warranties are offered via contract for a monthly or annual fee. In the contract terms, you get a fixed service call fee and annual coverage limits for repairs. Service fees and coverage limits vary depending on the company.

If a home system or appliance breaks down, you can file a claim online or contact your warranty’s customer service team. They connect you with an approved service provider to assess the problem and then perform the repair.

What Don’t Home Warranties Cover?

Home warranties will cover the cost of repairing many appliances and household systems. The extent of the coverage depends on the warranty company and what level of coverage you purchase.

However, some common items are generally excluded:

  • Structural issues in foundations, walls, paint and flooring
  • Commercial-grade equipment or systems
  • Pre-existing conditions
  • Normal wear and tear
  • Rust, corrosion and sediment problems
  • Improper maintenance, installation, design, manufacturer defect or previous repairs outside of the contract
  • Detection and removal of asbestos, radon gas and mold
  • Building and zoning code violations

Do I Need a Home Warranty?

When you purchase or rent a home, chances are you will be offered a home warranty as protection against costly unforeseen repairs. It sounds like a great idea, especially since the average monthly fee for home warranties is between $25 and $50.

But should everyone purchase a home warranty?

Pros

  • Peace of mind for those purchasing a home with used appliances and older systems
  • Convenience. (There is no need to spend time researching dozens of repair technicians.) The home warranty company has a network of trusted professionals.
  • No DIY skills or tools needed
  • Relatively inexpensive to purchase. The average monthly fees are less than $100.

Cons

  • Set coverage limits per repair or per year
  • Service call fees. Every time an incident happens, you’ll have to pay a service call fee that may range from $50 to $75.
  • Fine print. Claims can be denied if an item has not been properly maintained. The warranty provider may require you to show proof of maintenance.
  • Less Control. Home warranty companies determine whether to fix or replace a system.
  • You might never use it.

Should I Buy a Home Warranty?

A home warranty can be an excellent option to protect your home investment. When coupled with a good homeowners insurance policy, you can have most of your bases covered. However, if you purchased a new home, many house systems are covered by manufacturer warranties.

The same is true for new appliances. Before you take the plunge and buy a home warranty, make sure your systems aren’t already covered first.