Home warranty plans help reduce a buyers' fears that a major repair item might be required after purchasing a home.  For most, a big repair bill right after the expense of buying a new home can be a scary thing.  

Home warranty plans typically range in cost between $250 and $400 for the first year. The deductible is usually about $45 - $60. After the first year, the new homeowner usually can renew the policy, albeit at a higher rate.

Read What's Covered and What's Not Covered

This is the most common area of concern and confusion for home warranty customers.  A home warranty can be a very valuable thing, but you simply must know what's covered. Just like buying an extended warranty on a car, certain things will be covered, and certain things will be excluded.  Often times while a particular system might be covered, other sub-systems of parts of the covered system might not be covered.

Common Coverage

Appliances such as dishwashers, stoves, ovens, microwaves, garbage disposals and trash compacters often are covered, however often the refrigerator is only included at an extra expense. The same frequently goes for washers and dryers. HVA/C systems are also generally included, but there can sometimes be an additional cost if your home has more than 1 or 2. Pools and spas generally can be added at an additional expense.

Other interior systems that are typically covered include plumbing (ie: clogs, etc), electrical, ceiling fans and door bells. Light fixtures and faucets generally are not covered..

Be sure to check for any other systems in your home that you might need covered such as garage door opener, heat pumps, attic and exhaust fans, whirlpool bath motor and pump, instant hot water dispenser and central vacuum system.

Some Examples from Our Personal Experience

When a system fails, the warranty company generally seeks to take the lowest cost approach to get you back up and running.  That is to say, it might be rare that an entire system would be replaced under warranty, instead it's cheapest for the warranty company to just use band-aides on an old system.  Five $150 repair bills for them are a lot better than one for $1,000, especially as you have to pay the visit fee on each service call.

We just had the water service line (from meter to house) at our home fail and because it was outside the walls of our home, it was not covered either by our home warranty nor our home insurance.  While all of our damage was outside the walls of our home, even if the water had leaked into our basement, it would have not been covered by either as well.

Also be aware of spending/repair caps per system. If the wiring short circuits or major plumbing problems occur, the policy will not cover costs beyond a certain amount. Generally, these are around $1,000, sometimes less.

Do the Legwork

Do your homework!  just because the price is right, it doesn't mean it's the right warranty for you or your home.  Ask friends, family or your agent for a referral.  There is no substitute for first-hand experience with a company, its representatives and its policies.