Types of Home Warranties

If you’ve just bought a new home or have been living in your own home for a while and want a way to protect yourself against spiraling repair costs, a home warranty is a great choice. Home warranties can cover the repairs of all your major home systems and appliances, from plumbing and electronics to air conditioning, dishwasher, oven, and more.

However, it’s important to note that not every home warranty is equal. They can differ quite a lot in terms of what they cover and what sorts of protection they can offer, and every homeowner needs to understand the difference.

By learning about the different types of home warranty, you’ll be able to make an informed decision about which one is right for you. This guide will cover some of the most common types of home warranties, including the specifics of what is covered and recommendations regarding which home warranty would be the best for your needs.

What is a Home Warranty?

A home warranty is an agreement between a homeowner and a home warranty company. This agreement guarantees that if a home system or appliance breaks down from normal wear and tear, the home warranty company will send out a service professional who can either fix or replace the appliance or system.

Whenever a service request is filed, the homeowner will pay a small deductible or service fee. Even though the homeowner will pay a monthly premium for their home warranty, they still need to pay for the professional to come out. Yet, the home warranty company generally covers the costs of fixing these systems and appliances.

There are many types of home warranties, and it can be challenging to figure out which one you need. While some home warranties will cover nearly everything in your home, others will cover only the bare minimum. So before you even decide if a home warranty is right for you, it’s best to learn about the different types of home warranties.

What are the Different Types of Home Warranty?

There are several different types of home warranties out there, and it’s essential to understand the differences. In general, it doesn’t matter what kind of warranty you choose, they all work the same way. You’ll have to pay an annual premium, and you’ll be able to contact the warranty company to get repair costs covered, based on the specifics of the plan.

The one area in which home warranty types will usually differ is in terms of their coverage. This means that one kind of home warranty might not cover the same parts of your home and repair costs as another. It’s recommended, therefore, to weigh up the pros and cons of each type and think about what sort of coverage you want to choose the perfect plan.

For example, if you buy an older home with older appliances and systems, you may want to go for a home warranty covering nearly everything. It is more likely that systems and appliances will break down in an older home, making it so that you need to pay for numerous expensive systems even after you spent thousands on buying the house. On the flip side, you may want to choose a less comprehensive home warranty if you purchase a newer home with newer appliances because the likelihood that those will break down will be less.

• Systems and Appliance Home Warranties

A systems and appliance home warranty is the most common and the most comprehensive. This is the primary type of home warranty you should choose if you want widespread coverage for your property.

As the name implies, a systems and appliance home warranty is designed to cover repairs and replacements for all of your home’s major systems and appliances. This includes your electrical system, plumbing, heating, and cooling systems, plus major appliances like ovens, fridges, and dishwashers.

• Systems Home Warranties

Many of the top home warranty providers also offer simpler home warranties designed to cover just the core systems, rather than including all of the appliances. This means that a basic systems warranty should cover heating, cooling, electricity, and plumbing.

It won’t, however, usually cover things like your oven, fridge, freezer, washing machine, and so on. This can be a good choice for landlords renting out properties in which tenants will be bringing their appliances. It can also be an excellent choice for people who want some degree of coverage at a lower premium than a complete system and appliance warranty.

• Comprehensive/Advanced Home Warranties

At the other end of the spectrum, you can find comprehensive or advanced home warranties, which offer the ultimate level of protection and usually come with many optional extras.
An advanced home warranty will cover all systems – electricity, plumbing, heating, cooling – and all major appliances. It will also go even further with coverage for the likes of pools, spas, sump pumps, wells, septic tanks, additional water systems, additional AC systems, and so on. This is one of the best plans you can opt for if you want total peace of mind.

• Service Contracts and Extended Warranties

Service contracts, commonly known and referred to as extended warranties, are additions to an existing home warranty that you will add to likely cover other appliances are equipment. The home service contract will generally cover the cost to repair or replace home systems and appliances that the purchaser chooses to have covered. Similar to home warranties, these service contracts typically last about a year before they have to be renewed.

However, service contracts and home warranties are different things. While a home warranty will likely cover various things, a service contract is more like an a la carte service where you can add other items to your contract. Service contracts may be worth it if you have extra things you’d like to have covered or don’t feel like your home warranty covers as much as you’d like.

What Does a Home Warranty Not Cover?

A big part of researching home warranties is figuring out what home warranties do not cover. While the coverage will vary depending on the home warranty you choose, there are some general appliances, systems, and other things that typical home warranties will not cover.

For starters, a home warranty does not cover cosmetic damage. Instead, home warranties typically only cover normal wear and tear or malfunctions of the machine. So, if you manage to dent one of your new appliances, the home warranty will not cover the cost to fix or replace that appliance.

Further, home warranties will not cover misuse or neglect of the items under the contract. So if you’re systems break down because you did not clean them or do not take proper care of them, they may not be covered by your home warranty.

Additionally, if your homeowners’ insurance covers a system or appliance, it may not be covered by the warranty. This is typically referring to damage due to fires, weather, or other natural disasters.

For the most part, home warranties will not cover the following items or circumstances:

• Cosmetic defects such as scratches or dents.
• Damage from pests such as insects or rodents.
• Damage from pets.
• Improper installation of the appliance or system.
• Misuse or neglect of the appliance or system.
• Items that are covered by a manufacturer warranty.
• Items or systems that are covered by your home insurance.

Do Home Warranties Cover Pre-Existing Conditions?

If an appliance or system is broken when you were trying to get a cover by a home warranty, there’s a good chance that the home warranty company will not cover it. However, in some situations, home warranties can cover pre-existing conditions if the condition was unknown to the home buyer and warranty company at the time of purchase. For example, if a buyer purchased a home and was unaware of any pre-existing conditions when they bought the home warranty, there’s a good chance that the home warranty will cover the cost to fix the appliance or system.

Do Home Warranties Cover Modifications or Changes to Equipment?

Typically, home warranties will not cover modifications or changes needed when new or replacement equipment is installed. For example, if your water heater broke down and you need to get a new one, there is a good chance that you may need to modify the location where that water heater will go. Newer water heaters are generally larger than old ones, so many older homes need to have home modifications to fit the new water heater.

So while the home warranty company may help cover the replacement water heater, they will not cover any changes to the home to fit that new water heater. To understand fully what your home warranty will and will not cover, it’s best to read the fine print before you purchase that warranty. If you are aware that you are buying an older home and may likely need to make some changes, you should consider that as you are purchasing that home.

Which Home Warranty is Right for Me?

As you can see, there are various types of home warranty services, ranging from the basic, entry-level plans that cover critical systems up to advanced, comprehensive plans that cover almost every single part of the property. Which one should you choose?

It’s important to note that the ‘right plan’ will vary from person to person. Some homeowners will be fine with a base-level plan and take on the repair costs for their appliances themselves, thereby saving money on their premiums.

Others might want the peace of mind that comes with an advanced plan, especially if they own pools and spas. However, the vast majority of homeowners tend to favor a systems and appliance home warranty. Consider your own needs, budget, and situation to make the best choice for you.

Final Thoughts

Now that you know all about the different types of home warranties, it’s time to choose the home warranty that’s right for you. Whether you are a new homeowner or looking to get a better home warranty, searching for the right home warranty company can take time and effort.

So instead of spending too much time researching online or calling up different warranty companies, check out our expert guides. Our home warranty experts have done the research that you don’t have to.

*Any opinions, analyses, reviews, or recommendations expressed here are those of the author alone and do not constitute professional or expert advice.