Home warranty coverage is sometimes offered as part of a home purchase, typically as an added incentive for purchasers by the seller. It can also be purchased by the buyer at the time of closing, and many home warranties are offered at a discount if purchased within 30 days of a home’s closing.

However, home warranty coverage is not a required part of a home purchase transaction, and homeowners should know that you can buy a home warranty even if you have been in your home for a while, provided the home’s systems and appliances are in good working order when you purchase a home warranty.

What is a home warranty?

Home warranty coverage is separate and distinct from home insurance coverage. While coverage can vary depending on the company and different plans, generally speaking a home warranty covers protection on things like a home’s heating and cooling systems, major appliances like water heaters and stoves, plumbing and electrical. Essentially, home warranty coverage is for the mechanical systems in your home.

Many home warranty companies offer additional coverage — at an additional cost — for appliances not covered in a basic home warranty. Systems that are sometimes not included in a “basic” home warranty plan are:

• Automatic garage door openers
• Washers and dryers
• Hot tubs
• Freezers

Note: You might be able to purchase additional coverage for these items.

Home warranties are essentially one-year service agreements that cover wear and tear on expensive items, and most home warranties also cover labor costs associated with a repair.

When you think about the cost of repairing or replacing something like a hot water heater or the compressor in an air conditioner — where either a full replacement, or parts and labor can cost thousands of dollars — buying a home warranty can bring significant peace of mind. This can be particularly true for a new home when you don’t really know how much wear and tear the previous homeowners put on the systems.

Isn’t this why I have homeowner insurance?

Your homeowners insurance coverage protects your house and its contents from perils, not normal wear and tear. If there’s a fire in your kitchen and the stove is destroyed, your homeowners insurance will cover the costs of repairing and replacing the part of your home that was damaged in the fire, depending on what’s covered in your policy, of course.

If the heating element in your oven stops working a week before the family arrives for Thanksgiving dinner, that repair or replacement is not going to be covered by your homeowners insurance, but it would be covered by a home warranty.

Details matter — read the fine print

Home warranty coverage is frequently misunderstood, and Angie’s List reports that for years, home warranty companies topped their list of most-complained-about service providers.

While the reasons for complaints varied by customer, most issues appear to stem from a misunderstanding of what was covered, how repairs are handled and service fees. This is why it’s so important to read through your home warranty coverage agreement, and ask questions about anything that isn’t clear.

Since many homeowners receive a home warranty either as an incentive offered by the seller, or as a bonus from a real estate agent or the title company, they aren’t involved in the selection process of picking the company that provides the home warranty. Since you may not have had the option to select the company, make sure to read the service agreement completely and understand what is covered.

If you’ve purchased a home and decided you want to purchase home warranty coverage, research home warranty companies thoroughly, and pay close attention to what is and is not covered. If your state regulates service providers, check to see if the home warranty company you are considering purchasing coverage from is licensed in your state.

Perhaps the most important thing to keep in mind is that home warranty coverage is a service plan, not insurance.

What is covered by home warranty coverage and what isn’t?

Home warranty coverage usually extends to a covered system or appliance that has failed with normal wear and tear.

Homeowners are still expected to provide maintenance and keep things in good working condition. Put another way, if your furnace fails because a part simply wore out over time, the repair is likely to be covered by the home warranty. If your furnace fails because the filter has never been replaced, it probably will not be covered by the home warranty.

Other possible exemptions to home warranty coverage include:

• Like the furnace example, any system or appliance that fails for a reason other than normal wear and tear is not covered.
• Conditions that needed repair prior to the effective coverage period, known as “pre-existing conditions.”
• Modified or incorrectly installed appliances or systems.

Items that are damaged as a consequence of a system or appliance failing. Items that are damaged — but not covered by a home warranty — when a covered system fails can be a challenging concept to grasp, since most homeowners would look at the failure and the related damage as a single event. If your home warranty covers your dishwasher and a part breaks causing a leak that damages the cabinetry and flooring, it is likely that only the dishwasher will be repaired or replaced by the home warranty coverage. The cabinets and flooring aren’t part of the agreement. Only the mechanical system (the dishwasher) is covered.

Your homeowners insurance may cover the damage to the cabinetry and flooring, however, so long as the damage is considered sudden and accidental.

Submitting a claim

If you have home warranty coverage and one of your mechanical systems fails, review your agreement first. Most home warranty companies require you to call them, and then they will send one of their contracted service providers to make the repair. You might be charged a service fee (also called a trade service fee) for the repair visit, depending on the terms of the agreement.

Home warranty coverage protects the mechanical systems in your home, and it can protect your budget from being hit with unexpected and expensive repairs. Like any legal agreement or contract, it’s absolutely critical to read the documents carefully and understand what is and is not covered under your particular agreement. Research companies thoroughly, and pick a reputable provider.

And, if you are thinking about changing your home insurance provider, remember that you can which insurers are rated as the best home insurance companies in your state.

The content on this site is offered only as a public service to the web community and does not constitute solicitation or provision of legal advice. This site should not be used as a substitute for obtaining legal advice from an insurance company or an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter. The comments and opinions expressed on this site are of the individual author and may not reflect the opinions of the insurance company or any individual attorney.