Home warranty is a contractual agreement provided to an owner of a house by any of a number of different types of entities such as home builders, risk management groups, or others. A home warranty is not a warranty at all, but rather a home service contract that covers the repair and/or replacement costs of home appliances, major systems such as heating and cooling, and possibly other components of a home, structural or otherwise.

The home service contract generally covers home systems such as the home’s plumbing or electrical, and appliances like dishwashers that fail from old age/normal wear and tear. Coverage varies significantly across home warranty companies. Home warranty contracts do not cover all home repairs.

Basic home warranty coverage includes the main systems of the home and certain appliances. Most companies cover plumbing, electrical, heating systems, as well as refrigerators, dishwashers, and Microwave ovens. Some charge additional coverage for appliances such as clothes washers and clothes dryers.

A home warranty company will pay for the cost to repair or replace the system or appliance, as long as it has broken down from normal wear and tear. If the system or appliance failed because it wasn’t maintained (the water heater was not flushed or the fridge’s evaporative coils were not cleaned), most home warranty contracts will not cover the cost to repair or replace it.

Home warranties exist to repair or replace old worn out systems that have been properly cared for by the homeowner. Buyers should read the home warranty contract carefully to understand coverages, limitations, and exclusions.