Our evaluations and opinions are not influenced by our advertising relationships, but we may earn a commission from our partnersโ links. This content is created by TIME Stamped, under TIMEโs direction and produced in accordance with TIMEโs editorial guidelines and overseen by TIMEโs editorial staff. Learn more about it.
Homeowners insurance can cover a wide range of damages, but you might consider getting a home warranty as well for added protection.
Homeowners insurance protects your home and belongings if they're damaged, but there are limits to your coverage. A home warranty can fill in the gaps by covering normal wear and tear on your home's systems.
Home warranties are optional coverage that can pay for repair or replacement costs if something goes wrong with your plumbing, electrical, or HVAC system. A home warranty can also cover your refrigerator, stove, and other appliances.
Is a home warranty worth it? Understanding how home warranties work can help you decide if one might be right for you.
Home warranties cover repair, replacement, and maintenance costs in two distinct categories: appliances and home systems. Your warranty is designed to protect those things against normal wear and tear.
In terms of specific items that a home warranty policy covers, the list can include your:
Coverage for these items may be automatic in a standard home warranty policy. You may need to purchase add-on coverage for things like pools or hot tubs, septic systems, or a well pump if you're not connected to city or county water lines.
While home warranties can be fairly comprehensive, there are certain things they may not cover. For instance, home warranties generally don't cover appliances or systems that are still covered by a manufacturer's warranty.
There can also be exclusions with regard to the type of wear and tear or damage that's covered. Home warranties typically don't cover:
Solar panel systems are also excluded for the most part. And a home warranty usually won't cover any modifications that might need to be made to your home in order to complete repairs or servicing.
For example, say you bought a home warranty for your electrical system and you need to have the breaker panel replaced. Your policy might cover the panel replacement but not any sheetrock repair that needs to be done once the replacement is complete.
Home warranties work similar to other types of warranties when you have an issue.
First, you file a claim with the company that holds your warranty policy. The warranty company then sends out a technician to evaluate the claim. If you have damages or a service issue that's covered by the warranty, your policy can help with making repairs or paying for a replacement of the affected appliance or system.
You may be expected to pay a deductible when filing the claim, but as long as the event is covered your policy should pay the rest of the cost. It's always a good idea to read the fine print to check for any exclusions or limitations.
For example, say that your refrigerator conks out. You call your warranty company, which sends out a technician. The technician agrees that you need a new fridge and schedules a time to replace it. After paying the deductible, the warranty covers the cost of the new refrigerator and its installation, but you have to pay an additional fee out of pocket to have the old one disposed of at your local landfill.
Home warranties and home insurance are not the same in terms of the scope of what they cover and what they're designed to do for you. Here's a closer look at how they compare.
Home warranty | Home insurance | |
---|---|---|
Required | No | Not mandated by law, but lenders generally require it to obtain a mortgage. |
Coverage | Covers appliances and major home systems | Covers your home's structure, personal belongings, and other structures on the property such as a shed or garage |
How it works | Pays for repairs, replacement, or maintenance of covered appliances and systems | Pays to repair or replace your home, other covered structures, and belongings; Can also pay for temporary accommodations if you're unable to live in your home because it's damaged, or medical bills relating to injuries when someone is hurt on your property |
Deductible required | Yes | Yes |
The cost of a home warranty can depend largely on which company you're purchasing a policy with and what's included in the policy. A basic home warranty can cost $500 or more annually, which can turn into $1,000 or more if you're adding on supplemental coverage.
Cost is an important consideration, especially if you're already paying for a home insurance policy. On average, a typical home insurance policy runs $2,777 per year but where you live can make a difference in how much you pay.
Whether a home warranty is worth getting can depend on a few things, including the age of your home's appliances and systems, whether any of your appliances or systems are already covered by a manufacturer's warranty, and how much you could reasonably afford to pay toward repairing or replacing them if you had to do so out of pocket.
Here are some of the main pros and cons to weigh when considering a home warranty.
Choosing a home warranty requires research to find the right policy. You can compare home warranty companies and coverage options online. As you shop around for a policy, here are a few questions to ask:
Getting quotes from multiple home warranty companies can give you a better idea of what you'll pay for coverage and what's included in the policy. You may also want to spend some time reading customer reviews to get a sense of what people do or don't like about a particular home warranty company.
For example, if the majority of customers say that response times are slow when filing a claim, that's definitely something you'd want to know beforehand.
If you're interested in applying for a home warranty policy, it's important to choose a reputable company to work with. Things like good customer support, a large network of repair professionals, and positive customer ratings are all nice features to have when selecting a company.
Choice Home Warranty, for example, offers 24/7 support so that filing a claim or getting help is as easy as possible. Choice has handled more than six million service requests, so they're experienced in handling home repair and replacement issues. The company has a nationwide network of more than 25,000 repair professionals who can respond to claims in a timely manner.
When you're ready to apply for a home warranty, you can start with a rate quote. From there, you can provide the warranty company with additional information about your home and the systems you'd like to cover to put together a policy that fits your needs.
Getting a home warranty can be more appropriate in some situations than others. You might consider getting a home warranty if you:
Does everyone need a home warranty? No, and that's a big reason why this type of coverage is optional.
You might take a pass on a home warranty if you:
A home warranty isn't the only option for covering home repairs or replacement costs. Here are a few other ways you might pay for appliance breakdowns or home system repairs.
An emergency fund is designed to hold money that you can draw on when you have unexpected expenses. Home repairs can fall under that umbrella if something breaks unexpectedly or needs to be replaced.
If you're looking for the best place to keep emergency savings, an online bank could be a good fit. Online banks can offer higher interest rates to savers, while charging fewer fees. Sofi, for example, offers a competitive APY with no minimum balance requirements and no maintenance fee. The rate is one of the highest among online savings accounts.
APY* | 4.55% | Up to 4.20% | 3.90% |
---|---|---|---|
Min. deposit | $100 | $0 | $0 |
Min. balance to earn APY | $5,000 | $0.01 | $0.01 |
Monthly fee | $0 | $0 | $0 |
View Offer | View Offer | View Offer |
Interest-paying checking accounts allow you to earn interest, while offering the convenience of being able to access your money via a debit card or checks. Quontic Bank, for example, offers a high-interest checking account that earns interest when you make a minimum number of debit card transactions each month. You just need $100 to open the account.
APY* | Up to 3.30% | 0.50% (though 4.20% can be earned on savings account balances) | 1.10% |
---|---|---|---|
Min. deposit | $0 | $0 | $100 |
Monthly fee | $0 | $0 | $0 |
Paper checks available | Yes | Yes | Yes |
View Offer | View Offer | View Offer |
CD accounts might be a good alternative to a home warranty if you want to set aside money for planned repairs and replacements. With a CD, you deposit money and earn interest for a set term. Once your CD matures, you can withdraw your initial deposit and the interest earned.
If you have $1,000 to save, you might consider a CD with CIT Bank instead. While you get a higher rate with Discoverยฎ 12-month CD, you can withdraw without penalty with CIT bank 11-month CD. It all depense on which option is best for you.
APY* | 4.10% | 3.50% | 3.00% |
---|---|---|---|
Term | 1 Year | 11 months | 6 Months |
Min. deposit | None | 1000 | $1,000 |
Monthly fee | $0 | $0 | $0 |
View Offer | View Offer | View Offer |
If you don't have cash in reserve to pay for home repairs, you could get a personal loan instead. With Upgrade, for example, you can borrow up to $50,000 to make home repairs or improvements. Upgrade also offers high yield savings accounts and rewards checking for all-in-one money management.
While taking out a loan may not be ideal, it can be less expensive than using a high-interest credit card to cover home repairs. Shopping around for rate quotes can help you find the best personal loan option.
APR | 7.99% to 35.99% | 9.99% to 35.99% | 7.80% to 35.99% |
---|---|---|---|
Loan amount | $1,000 to $36,500 | $1,000 to $50,000 | $1,000 to $50,000 |
Term | 24 to 72 months | 24 to 84 months | 36 or 60 months |
View Offer | View Offer | View Offer |
Getting a home warranty is something you might choose to do if you're worried about home repairs derailing your budget. Before buying a policy, it's helpful to look at your coverage options and what you might pay for a home warranty.
Most home warranty policies last for one year. If you're getting a new home warranty from your builder, the policy may last for up to 10 years, depending on the coverage that you have.
If your AC unit breaks down and needs replacing, it's possible that your home warranty may cover it. You'll first want to review the details of your policy to see if your HVAC system is covered and if so, whether there are any limitations or exclusions to coverage. From there, you can contact your warranty company to file a claim to have the unit repaired or replaced.
The best home warranty company for you is the one that offers the level of coverage you need at a price you can afford. Choice Home Warranty is one of the better options but it's worth taking the time to compare different warranty companies to find one that you want to work with.
The information presented here is created by TIME Stamped and overseen by TIME editorial staff. To learn more, see our About Us page.