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You’ve likely seen TV ads for home warranty plans. If you’re buying an older home, these contracts may be worth considering. Older appliances and systems, like the furnace, water heater, or oven, are more likely to break down. A home warranty can help cover the cost to repair or replace them, which can save you time, money, and stress. Here’s what you need to know about how these contracts work.
Key Takeaways
- Home warranties help pay to repair or replace household appliances and major home systems.
- You’ll pay a monthly or yearly fee, plus a service fee each time a technician comes to your home.
- They usually cover breakdowns from everyday use, but not damage to the home’s structure, items still under the manufacturer’s warranty, or things used for business.
- Home warranties are not the same as homeowners insurance, which covers property damage and injuries to others on your property.
Understanding Home Warranties
A home warranty is a contract that helps pay to fix or replace appliances or major home systems when they break down from everyday use.
Here’s how it works:
- You pay a monthly or annual fee to the home warranty company.
- If something covered in your contract breaks down, you contact the company and file a claim.
- A technician comes to your home to fix or replace the item.
- You pay the home warranty company a service fee for the visit.
What Does It Cover?
The table below shows common items that home warranty contracts usually cover, and what they don’t. Coverage can vary between companies, so compare providers before choosing one. This list is not exhaustive.
What’s Covered
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Central air conditioning
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Heating systems
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Water heaters
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Refrigerators
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Dishwashers
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Stoves
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Built-in microwaves
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Washers and dryers
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Ductwork and exhaust systems
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Ceiling fans
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Toilets
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Faucets, valves, and plumbing
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Garage door openers
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Septic systems
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Doorbells
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Leaky roofs
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Electrical lines
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Breaker and fuse panel box
What’s Not Covered
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Structural issues
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Items still under the manufacturer’s warranty
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Pre-existing conditions
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Cosmetic damage
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Damage resulting from business activities, such as a bed and breakfast or Airbnb
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Improperly installed items
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Items not properly maintained
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Misuse
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Damage from pests
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Acts of nature
How Much Does a Home Warranty Cost?
Home warranty costs vary based on where you live, what’s covered, and which company you choose. In 2025, Angi reported a national average of $1,049 per year, with prices ranging from $222 to $1,877.
Home warranty service companies also charge you a service fee each time you file a claim, the same way an electrician or plumber would charge you for an initial home visit. This is a flat fee you pay on top of the cost of the home warranty itself. Service fees vary and can range from $75 to $125, depending on the company, according to This Old House.
How Does It Differ From Homeowners Insurance?
Unlike home warranties, homeowners insurance covers financial losses related to your home, belongings, and other structures caused by unexpected events like fires, storms, or burst pipes.
You also get coverage for loss of use if you can’t stay in your home or if someone else gets hurt while on your property.
Tip
A home warranty contract can be a great complement to your homeowners insurance policy.
Why Do You Need a Home Warranty When Buying an Older Home?
A home warranty can be a valuable asset and a great resource if you’re buying an older home. Here’s why:
- It can protect against everyday wear and tear: Your home warranty contract can cover the existing appliances and home systems (heating and air conditioning) in the home you buy. It’s a bonus if the agreement covers a pool, sump pump, and septic system, and your property comes with these features.
- Financial predictability: You’ll know how much your annual contract and service calls cost for your home warranty service, so you won’t have to save for unexpected repairs.
- Access to qualified contractors: Your contract connects you with local professionals, so you don’t have to search for help, saving time and effort.
- Coverage for unknown issues: Although not guaranteed, the home warranty company may cover hidden issues with your HVAC, electrical system, or appliances that weren’t addressed during your inspection.
The Bottom Line
Home warranty contracts can provide some financial security against unexpected costly repairs when you’re buying an older home. Remember that coverage is for normal wear and tear and doesn’t cover neglect or structural damage. Your contract also saves you time and effort because it gives you access to qualified technicians in your area while making repairs more affordable.
