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Home maintenance and repairs

Home warranty

A service contract, bought for a set term, that pays toward repairing or replacing covered home appliances and systems, usually with a fee for each service call.

What It Means

A home warranty is a service contract that pays toward repairing or replacing covered parts of a home, such as appliances or the air conditioning system. It runs for a set term and costs extra, and most charge a fee each time a technician comes out. Despite the name, it's a contract with its own list of what's covered and what isn't, so the details decide whether it's worth the price.

Try It: Does a Home Warranty Pay Off for You?

Example numbers to start. Put in a quote you've received and your own guess at repairs in a typical year.

Contract cost this year$800
Per month$67
Difference$300

The contract costs more than the repairs you expect. Saving that amount yourself may cover the same bills.

How It Sounds at Home

  • "The seller threw in a one-year home warranty."
  • "I put in a claim, and they sent a tech out for the dishwasher."
  • "Is the fridge on the warranty?"

The Breakdown

Worked example. A homeowner has a quote and a rough idea of repairs:

ItemAmount
Contract price for a year$600
Service fee, $100 × 2 calls$200
Contract cost$800
Covered repairs they'd otherwise pay for$500

The contract costs $300 more than the repairs they expect, so saving the same money in a repair fund would have covered this year's bills. In a year when a covered system fails and the company pays, the math flips.

What moves the number. The age of your appliances and systems, how many service calls you make, the fee per call, and anything the contract excludes. A repair the contract won't pay for counts as money you still spend, so read the exclusions before you put a number in.

Good to Know

The FTC notes that a home warranty may duplicate coverage you already have, may cover only part of a product, or may make it hard to get repairs done when you need them. Before you sign, the FTC suggests checkingChecking accountA bank or credit union account for everyday money going in and out, used by debit card, checks, transfers and direct deposit. See more whether accidental damage is covered, whether the company can deny a claim if you skipped routine maintenance, the fees charged for each service, and the company's reputation. A home warranty doesn't replace homeowners insurance, which covers damage from events your policy names.

FAQ

What does a home warranty cover?

Usually repairs and replacements for things like appliances and air conditioning, for a set term, per the FTC. Each contract has its own list, so read what it covers and what it leaves out.

Is a home warranty worth it?

It depends on the price, the fees, what's excluded and how old your appliances are. The FTC suggests working out the yearly or monthly cost and checking the company's reputation first.

Is a home warranty the same as homeowners insurance?

No. A home warranty is a service contract for repairs to appliances and systems, while homeowners insurance pays for covered damage and losses, like a fire or a storm.

Do It in Buhata

Vault (Plus), Bills (Plus), Goals (Plus)

With Plus, keep the warranty contract and its exclusions in Vault, add the renewal to Bills, and track a repair fund as a Goal to compare against the contract price.

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Related Terms and Categories

  • Appliance lifespan

    How many years a home appliance usually lasts before it needs replacing, from about 6 years for a compactor to 15 for a gas range in Consumer Reports' 2009 figures.

  • Sinking fund

    Money set aside in small, regular amounts for a known future cost, so the bill doesn't land on a single paycheck.

  • Licensed contractor

    A contractor who holds the license your state or local government requires for the kind of work being done, which you can check before you hire.

  • Homeowners insurance claim

    A request to your homeowners insurer to pay for damage or loss the policy covers, backed by photos, a list of what was lost and your receipts.

Home maintenance and repairs

Sources

Federal Trade Commission, "So what's the deal with 'home warranties'?" (consumer alert, 2023); Federal Trade Commission, "Extended Warranties and Service Contracts"; Federal Trade Commission, "Warranties"

Last updated .