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What exactly is the house warranty policy, and how does it function?

February 13, 2023

You may have noticed countless ads online for home warranty policies or multiple emails boasting about the coverage of home appliances and offering services for repairing electronic equipment that wears out due to some cause. This may leave you wondering what this policy is about, how it works, or whether it is a hoax. These insurances, however, are not fraud and are genuine. It might be beneficial and assist you in saving a significant amount of money. Here's a quick reference guide to help you understand it better.

What is the home warranty policy?

Home warranties are service agreements that cover the cost and services of different home appliances that deplete due to natural deterioration, such as heaters, freezers, coolers, dryers, and washing machines. A house warranty reduces the cost of HVAC (heating, ventilation, and cooling) and electrical system repairs and replacements. It is a one-year policy that can be renewed annually. The home warranty company often has contracts with a wide range of service providers, including plumbing and electronics.

Difference between home warranty policy and home insurance

Both have similar features in liabilities and claims but provide warranties on different services. Both warranty and insurance reveal the same meaning: protection. A home warranty policy covers expected appliance damage, such as aging and eventual system failure. It includes the repair and replacement of electronic devices such as coolers, refrigerators, heaters, and washers. Each plan of a home warranty policy is unique.

 Homeowners insurance protects your belongings against theft, fire, and natural disasters. The insurance company will cover the cost of any damage to the house caused by theft, fire, or natural disaster. 

What is the coverage of the home warranty policy?

Unless the property is larger than 5000 square feet, the cost of a home warranty does not change with its age or square footage. Furthermore, each company has its policy for covering other housing components. For example, some firms include the cost of a garage in their policy but charge extra for a guest home or other comparable property. Home warranty fees can be paid in installments or whole. The house warranty coverage covers yearly costs ranging from $300 to $1000, with monthly costs ranging from $20 to $50. If the technician visits your home, the service fee will range between $60 and $100. In addition, house warranties cover service calls, often known as labor expenses. Labor costs are the fees or charges imposed on the service provider by the home warranty organization to repair any appliances or damage.

How does the warranty work?

A house warranty is not house insurance but rather an agreement between the homeowner and the company to repair or replace defective appliances. If any of the appliances covered by the insurance sustain damage, the homeowner can request that the firm send a professional to fix the broken item. The firm will pay the majority of the bill, but not the service fees that were agreed upon at the time of purchasing a home warranty plan. For example, suppose you purchased a brand new air conditioner whose guarantee expired after a certain amount of time. If a problem arises with the appliance in the future, you will have to pay hundreds or thousands of dollars to repair it. However, if you have a home warranty, it will cover the cost of the damaged equipment, saving you several hundred dollars. 

Who pays for the home warranty? Buyer or seller

Anyone, buyer or seller, can acquire a home warranty. Though purchasing a home warranty is not required, it will provide significant benefits to the purchaser. There are several reasons for both the buyer and the seller to purchase home warranty coverage. The objective of a house buyer's home warranty differs from that of a seller's home warranty.

Reasons why a seller would purchase a home warranty policy

When you put your house up for sale, the only thing you have to worry about is what will happen if something breaks or has to be replaced. The best thing the seller can do for himself is to get a house warranty for the protection of appliances. It can alleviate the seller's post-sale stress by preventing the seller from having to pay for the repair while the home is on the market for sale. Moreover, when selling a property, having a home warranty makes it look more appealing and comforting to the buyer.

Reasons why a buyer would purchase a home warranty policy

A house warranty policy can be purchased via a real estate agent or directly from the home warranty business. In addition, if the seller is interested in the transaction, the buyer might request that the seller pays for the coverage for the first year. It will also assist the buyer in obtaining a new policy for the property if he is not interested in continuing the prior policy purchased by the seller. Furthermore, purchasing home warranty coverage provides a sense of security if any equipment requires replacement or repair, and buyers will be relieved of the burden of spending hundreds of dollars on appliances.


One of the major disadvantages is that a home warranty business will not cover a property that has not been properly maintained, and even if it is insured in any condition, the buyer will not profit. Any service you receive will be a waste of money if the appliances for which the seller obtained the house warranty are exceedingly old. For example, if the former owner sold the old refrigerator, which is around 5–6 years old, the new owner will be required to purchase a new refrigerator regardless of how many times the technician repairs certain parts. Home warranties are sometimes more expensive than appliance repairs or replacements, but what if nothing breaks or is damaged and a person has purchased the policy in advance? In that case, only the company will benefit from his policy, and all of the money spent on it will be a loss for that person.


Purchasing a home warranty policy can be advantageous for certain homeowners. It is entirely up to the individual whether or not to purchase the policy, but the individual should be aware of the policies or guidelines of the policy before purchasing it. It is critical to read and comprehend all warranties to determine if they are advantageous to you and your family. Furthermore, it is critical to investigate what the policy claims and if purchasing one is risky and likely to be effective.

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