A home warranty is a service contract between a homeowner and a home-warranty provider. The contract provides discounted repair and replacement services on the home’s major appliances and components.
Standard policies provide coverage for the home’s furnace, plumbing, air conditioning and electrical systems, while more extensive packages cover major appliances, such as refrigerators, washers and dryers.
The bulk of home warranties possess a basic component that outlines the initial items covered by the policy. Homeowners may add additional components for a fee to secure extended coverage. The cost of a home warranty is dependent on the level of coverage and the property type. In addition to the annual premium, home warranties commonly require fees for service calls whenever the holder requests an examination of their covered component.
Home-warranty companies utilize their own service providers. When a covered appliance or component breaks down, the policy holder or homeowner contacts the home-warranty issuer to initiate an examination of the item. If the provider determines that the repair or replacement cost is covered by the policy, an approved service provider will replace or repair the item for a marginal fee.
A home warranty is not to be confused with homeowners insurance, which protects against perils such as fires, severe weather and property crimes that damage the home’s entire structure or the owner’s personal possessions.