What is a Home Warranty and What does it Cover?

A home warranty is one of the best means of protecting your budget that a homeowner can have. But, what exactly IS it?
American Home Shield Home Warranty Protects a Broken Washer

Photo by: American Home Shield

When you own a home, you need to watch every penny. That’s because owning a house has tons of hidden expenses, and most of them have to do with repairing and replacing home systems and appliances. When something goes wrong with your refrigerator, stove, or HVAC, the cost of fixing it — or replacing it if it can’t be fixed — can easily reach into the thousands of dollars. 

It can be hard to protect your budget in the face of escalating repair and maintenance costs. A home warranty is one of the best means of protecting your budget that a homeowner can have. 

As a homeowner, costly repairs are probably one of your greatest worries. So what if someone told you that you could help alleviate those fears with the knowledge that if something does break, it's covered for one simple service fee? Sounds too good to be true? Well, it's not. A home warranty can help you keep your home maintenance costs within a reasonable monthly range.

But, what exactly IS it? And what will it cover?

So what exactly is it?

What does “warranty” mean in the context of a home warranty? 

Simple, it is a one-year service contract that covers repairs and replacements of most major home appliances and system components due to failure, standard usage and other problems that happen due to age.

Learn More: What is a home warranty?

What’s the difference between a home warranty vs. home insurance?

It’s easy to confuse a home warranty with homeowner’s insurance, but the difference is clear. A home warranty covers wear and tear breakdowns of covered home appliances and systems — it’s the protection you need against the day-to-day things that can go wrong in your home.

Home insurance, on the other hand, protects your home and its contents from catastrophic loss or damage, such as due to fire, theft,or storms.

For comprehensive protection, having both keeps you protected from the normal breakdowns, as well as the catastrophic events.

What does Home Warranty cover?

When buy a home warranty plan, it will typically cover most major components of large home systems, such as your HVAC, hot water heaters, plumbing, electrical and more. It may also cover regular appliances such as washers, dryers, refrigerators and stoves. Some plans allow you to purchase optional add-on coverage for your spa, second refrigerator, swimming pool, pumps and more. 

Check out our plan comparisons to find the right coverage for you. 

American Home Shield offers three home warranty plans: Appliances, Systems and Combo. 

The Appliances Plan covers up to 10 major home appliances, like washers and dryers, dishwashers and microwaves. 

The Systems Plan covers up to 11 home systems, like plumbing, electrical and HVAC. 

The Combo Plan combines both, covering 21 items in total. 

Learn more and find the plan for you.  

How does Home Warranty work?

When your appliance or home system breaks down, call your home warranty company. If the breakdown is covered by your plan, they will set up an appointment with a licensed, pre-screened service provider in your area. 

When the licensed service technician arrives, they will assess the situation and your coverage and tell you the proper course of action to repair your appliance. Then you pay them only the service call fee (up to $125, depending on the company). The rest of the cost is covered by your provider.

Is there a limit to the number of repairs I can make?

This can depend on your provider and contract, but American Home Shield does not place a limit on the number of covered repairs. Although, some coverage limitations and exclusions may apply. 

For example, there’s usually a cap on the dollar amount of coverage for each repair or replacement. If repairing or replacing your home appliance costs more than the coverage limit, you will have to make up the difference.

When do you purchase a home warranty? 

A plan can be purchased when you first purchase your home or any time during your ownership. Moving and adapting to a new neighborhood can be stressful enough for you and your family. Knowing that your appliances and systems are covered by a home warranty can alleviate a great deal of worry.

Many home buyers are encouraged to ask the seller for a home warranty when they make a home purchase — especially if it’s an older home with older appliances. When you don’t know much about the history of the home or how well its systems and appliances have been maintained, a home warranty can sweeten the deal. 

Sometimes, the seller of the home will pay plan costs for the first year of home warranty coverage after the buyer takes possession, but it’s also not unheard of for a real estate agent to offer a home warranty to the buyer as a housewarming gift.

How long will home warranty coverage last?

Most home warranty terms are one year. This is a 12-month contract which in many cases is renewable from year to year. Make sure to renew your home warranty promptly each year so that you’re not caught without coverage. 

How much does a Home Warranty cost?

Depending on your provider and your location, home warranties can run around $75 per month for a policy that includes most major appliances and home systems. You can add on coverage for additional larger systems like pools and spas, septic pumps, water well pumps, guest units, and even home electronics. 

In general, a home warranty plan costs about $350 to $500 a year, depending on the level of coverage you choose.

Does a home warranty offer coverage for a roof?

Most home warranties do not offer coverage for your home's roof — however, American Home Shield offers a range of add-ons to our plans, including roof leak coverage

Just add roof leak coverage to your American Home Shield plan when you check out online.

Will a home warranty cover my pool?

Yes, you can get American Home Shield home warranty coverage for your pool or spa. Just choose the Pools and Spas add-on when checking out online, or ask your customer service representative to add the coverage to your plan when you purchase over the phone. 

Pool and Spas add-on coverage includes components of above-ground setups, as well as mechanical parts of your pool and spa, like the pump, heater and pool sweeper.

Does a home warranty cover my well pump or septic system?

American Home Shield members can choose to add Septic Pump and Well Pump coverage to their home warranty plan. The Septic Pump add-on covers the major components of the septic system, and Well Pump add-on does the same for the components and parts of your well pump. 

Does a home warranty cover guest units?

For on-site guest units of 750 square feet or less, American Home Shield members may select the Guest Unit add-on for their American Home Shield home warranty. This applies all the same coverage of your main home to the second unit. 

If you have an accessory dwelling unit larger than 750 square feet, you may need to buy a separate home warranty to cover the home systems and appliances in it. 

Landlord or rental property home warranties are ideal for guest units and accessory dwellings that don’t qualify for the add-on, and that you don’t live in. But even if you or someone else in your household or family does live in the accessory unit, you can still cover it with a home warranty. For landlords, the cost of a home warranty can even be tax deductible. Learn more about home warranties for rental properties

Does a home warranty cover home electronics?

When you become an American Home Shield member, you can choose to add electronics coverage to your plan to cover all of your home electronics, except your smartphones. 

Our third-party electronics coverage covers an unlimited number of home electronics from normal wear and tear damage, no matter how old they are or how long ago their original manufacturers’ warranties expired.Find out exactly what’s covered in the electronics warranty plan add-on.

How can a home warranty help me sell my home?

When it comes to selling your home, offering a home warranty in the contract is an excellent way to entice buyers. It shows good faith and offers an assurance to buyers that the home appliances and major components of home systems are covered for the first year of ownership. If you already have a home warranty, a typical policy can be transferred to the new owner.

Find the home warranty plan for you

Not only will a home warranty protect your largest investment, but it's sure to help you plan for the unexpected. Now who doesn't want that? 

Compare American Home Shield plans and prices online today and get a free quote for your new home warranty plan.

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