How Does a Home Warranty Program Work?

A home warranty program protects your home by replacing or repairing items that are not covered by your homeowners insurance. When a home’s mechanical systems fail – such as the central air conditioning or heating system – or major appliances break down, a home warranty limits your maximum out-of-pocket expenses for each repair.

When a breakdown occurs, you simply contact the home warranty firm and they contract a local services firm. The local services firm will arrange an appointment to provide either a repair or replacement.

There are two payment components to a home warranty protection plan: an annual flat fee (differs by state, but ranges from $300 to $500 a year), plus a small service fee (typically about $75-$125) for each reported repair. Home warranty plans and their coverage will differ, so read the contract terms carefully to avoid future surprises.