A home warranty provides coverage for the repair or replacement of home appliances and systems. With a home warranty, homeowners don't have to worry about expensive repair or replacement costs. When a problem arises, the home warranty calls a contractor out, and homeowners pay a co-payment for the service. There are plenty of benefits to home warranties and a few drawbacks. Keep reading for all you need to know about home warranty plans.

Homeowner's Insurance vs. Home Warranty

If you want to protect your home with a warranty, know the differences between a home warranty and homeowner's insurance. Homeowner's insurance covers damage to property by fire, hail, wind, theft, and vandalism. It also covers liability for guests' injuries while on the property. A home warranty covers appliances and systems that malfunction and need fixing. Home warranties often are included in the sale of a home, but they are not required. Mortgage lenders require homeowner's insurance on all homes. A home warranty will only cover the appliances specifically listed in the home warranty contract. There are many different companies and coverages, so compare before purchasing. 

Is a Home Warranty Worth the Cost?

For some homeowners, a home warranty is definitely worth the expense. The warranties cover appliances and systems regardless of their age. Home warranties help reduce homeowners' out-of-pocket costs for repairs or replacements. When buying a home, a warranty provides peace of mind to new homeowners. They don't know how all of the appliances have been operating, and with a warranty, they know that they will only have to pay a co-pay if things need repair. A home warranty may also be worth the investment if the appliances in a home no longer have manufacturers' warranties. The home warranty will reduce out-of-pocket costs for expensive things like air conditioners or refrigerators. 

Home warranties do not, however, cover pre-existing conditions. Do not purchase a home warranty because the air conditioning has not been working well and hope that the warranty company will fix the problem. Another drawback to home warranties is that they use their contractors. Homeowners do not have input as to which contractor gets called. A home warranty company will often continue to repair old systems that should be replaced. Homeowners will continue to pay service call co-payments to keep a system going a little longer when the money might be better spent on a new system altogether. 

What is Covered?

Typically, a home warranty covers service, repair, or replacement of major home systems and appliances listed in the contract. Usually, home warranties cover electrical systems, ductwork, interior plumbing, water heater, and heating furnace. Normally covered appliances include the dishwasher, refrigerator, oven, range, cooktop, garbage disposal, garage door opener, and air conditioner. Spa equipment, pool equipment, septic systems, and sump pumps are often optional items, and homeowners can purchase coverage at an additional price. 

How Much Does It Cost?

Home warranties are usually purchased by the year and paid monthly. The average annual cost is between $400 and $550. The price for each service call also varies, but averages between $60 and $125, depending on the company. Usually, you get what you pay for, and a more expensive plan will be more comprehensive.

Homeowners wanting to reduce out-of-pocket costs for repairs may find a home warranty is a good fit. Be sure to compare what is covered by different warranty providers before making a final decision.