How much does a home warranty cost?

Basic plan (systems or appliances only): $300-$500/year. Combo plan (systems + appliances): $400-$800/year. Service call fee: $75-$125 per visit. Average total annual cost: $500-$1,000 (premium + 1-2 service calls). Add-ons: pool/spa ($200-$400/year), well pump ($100-$200/year), septic ($100-$200/year). The seller often pays for the first year as part of the real estate transaction (as an incentive to the buyer). Renewal is at the homeowner's option.

Is a home warranty worth it?

It depends. Worth it if: you are buying an older home where the HVAC, water heater, and appliances are nearing end-of-life, you do not have a large emergency fund for surprise repairs, or you are a first-time homeowner and want budget predictability. Not worth it if: your home is newer (systems and appliances are still under manufacturer warranty), you have a healthy emergency fund ($5,000-$10,000 for home repairs), you are handy and can handle basic repairs, or you have had negative experiences with warranty claim denials. The math: most homeowners pay $400-$800/year and file 0-1 claims. Average claim payout: $200-$500. Over 5 years: you may pay $2,000-$4,000 in premiums and receive $500-$1,500 in benefits. An emergency fund earns interest and has no exclusions.

What is the difference between a home warranty and homeowner's insurance?

Homeowner's insurance: covers damage from events (fire, storms, theft, vandalism, liability). Required by mortgage lenders. Covers the structure and personal property. Deductibles: $500-$2,500. Does NOT cover mechanical breakdowns or normal wear and tear. Home warranty: covers mechanical breakdowns of systems and appliances due to normal wear and tear. Optional (not required by lenders). Does NOT cover damage from events (fire, storms, theft). Service call fee: $75-$125. They cover different things and do not overlap. You need homeowner's insurance (it is required and protects your biggest asset). A home warranty is optional and supplements insurance by covering the things insurance does not (mechanical failures).

How do home warranty claims work?

Step 1: A covered item breaks. Step 2: Call the warranty company (or submit a claim online). Step 3: The warranty company assigns a service contractor (you usually cannot choose your own). Step 4: The contractor schedules a visit (typically within 24-48 hours, though response times vary). Step 5: You pay the service call fee ($75-$125) when the contractor arrives. Step 6: The contractor diagnoses the problem and reports to the warranty company. Step 7: The warranty company approves or denies the claim. Step 8: If approved: the contractor completes the repair or replacement (the warranty company pays the contractor directly, minus your service fee). If denied: you can appeal or pay for the repair yourself. Common denial reasons: pre-existing condition, improper maintenance, not covered under the contract terms, or exceeds coverage limits.

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Home Improvement

Home Warranty Guide: What It Covers & Is It Worth It

Lumberama Editorial Team, Home Protection & Warranty Specialists Aug 3, 2026 12 min read

What Is a Home Warranty

A home warranty (also called a home protection plan) is a service contract that covers the repair or replacement of major home systems and appliances when they fail due to normal wear and tear. It is NOT insurance (insurance covers damage from events like fire, storms, and theft). A home warranty covers mechanical breakdowns of covered items. How it works: when a covered item breaks, you call the warranty company, they send a service technician, you pay a service call fee (typically $75-$125), and the warranty company pays for the repair or replacement (up to the coverage limits).

What It Typically Covers

Systems plan (basic): HVAC (heating, ventilation, and air conditioning), plumbing (pipes, fixtures, water heater), electrical (wiring, panels, fixtures), and sometimes ductwork and garage door opener.

Appliance plan: Refrigerator, oven/range/cooktop, dishwasher, built-in microwave, washer, dryer, and garbage disposal.

Combo plan (most popular): Both systems and appliances. Many plans also include: ceiling fans, exhaust fans, doorbells, and smoke detectors.

Optional add-ons (additional cost): Pool/spa ($200-$400/year), well pump ($100-$200/year), septic system ($100-$200/year), roof leak repair ($100-$200/year), and second refrigerator/freezer ($50-$100/year).

What It Does NOT Cover

Pre-existing conditions (items that were broken before the contract started — warranty companies can deny claims if they determine the failure existed before coverage began), cosmetic defects, items not properly maintained (if the HVAC failed because filters were never changed: denied), code upgrades (if a repair requires bringing something up to current code: often not covered), modification or upgrade costs (if the broken item is no longer available and the replacement requires modifications: often not covered), and specific exclusions (read the contract carefully — common exclusions include: known defects, commercial-grade equipment, secondary damage from a covered failure, and items covered by manufacturer's warranty). Coverage limits: Most plans have per-item and annual caps (e.g., $2,000 per item, $5,000 per year). If the replacement cost exceeds the cap: you pay the difference.

Is It Worth It

Arguments for: Budget protection (a predictable annual cost instead of surprise repair bills), peace of mind (especially for new homeowners unfamiliar with their home's systems), convenience (one call and the warranty company handles finding a contractor), and valuable for older homes (where systems and appliances are more likely to fail).

Arguments against: Coverage gaps and exclusions (the contract language often allows denial of claims), service quality (you do not choose the contractor — the warranty company sends whoever is available, and quality varies), claim denials (warranty companies have financial incentives to deny claims), slow response times (not suitable for emergencies), and over the long term, most homeowners pay more in premiums than they receive in benefits.

The math: Annual cost: $400-$800. Service call fee: $75-$125 each. Average claim payout: $200-$500 per claim. To break even: you need 2-3 claims per year with successful payouts. Most homeowners file 0-1 claims per year.

Bottom line: A home warranty makes the most sense for: buyers of older homes (where multiple systems are aging), first-time homeowners (who may not have an emergency fund for repairs), and homes where the HVAC, water heater, or major appliances are near end-of-life. It makes less sense for: newer homes (items are still under manufacturer warranty), homeowners with a healthy emergency fund, and handy homeowners who can handle basic repairs themselves.