Learn the Basics about Home Warranties

A home warranty, also referred to as a home service contract, is a contact between a homeowner and a home warranty company that provides repair and replacement service options on a home's major systems including plumbing, electrical, heating, and cooling. It typically covers major appliances such as the stove/oven, refrigerator and dishwasher. Some utility companies also offer a protection plan for the above systems and appliances.

When a home system or appliance stops working, a home warranty company will usually pay for the cost to repair or replace the system or appliance, and a small fee or deductible may be required. Repairs and replacements are reviewed with consideration of whether the problem was due to normal wear and tear. Most home warranty contracts will not cover the cost to repair or replace a system or appliance that failed because it wasn’t properly maintained.

Consumersadvocate.org provides a helpful checklist of items to be aware of as you shop for a home warranty policy.

According to Realtor.com, home sellers can make their home more attractive to potential buyers if they purchase a home warranty policy, particularly a policy that is transferrable to the new buyer. This can be beneficial to first-time homebuyers who may be unfamiliar with home maintenance.

Depending on the coverage you choose, a policy can range in cost from $250 to $500. Home warranties can vary widely, depending on the terms set forth by the company selling the policy, so be sure to get specifics from the provider you are considering. Before contracting with a home warranty company, ask to see a sample copy of a policy and make sure you understand the terms and exclusions. Coverages can vary from state-to-state and from policy-to-policy

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