The Value of a Home Warranty

Ask Phyllis: a blog series of frequently asked real estate questions.

The Value of a Home Warranty

Dear Phyllis,

My godson purchased his first home three months ago. As part of the purchase, he obtained a home warranty. He was doing some major remodeling before he moved in, and when the walls were opened, he discovered numerous issues with the Romex wiring. The contractor working on the home gave him an estimate to replace the wiring. He contacted the home warranty company, and it took four days for them to come out. Because he feared a fire, he had already had his contractor start the work. The company won’t reimburse him for any of his contractor’s work. I am asking for your input on the value of a home warranty.

Jenna

Dear Jenna,

A home warranty is a service contract that covers repairing or replacing some home systems and appliances. Unlike homeowners’ insurance, which typically covers damage from external events like natural disasters, a home warranty focuses on the mechanical components of a home. Depending on your policy, these may include heating, ventilation, air conditioning, plumbing, electrical, and major appliances like refrigerators, ovens, and washing machines.

The homeowner can contact the provider when a covered item breaks down or malfunctions. They will arrange for a service technician to assess, repair, or replace the item. It’s important to note that these policies have a lot of coverage limitations and exclusions.

As your godson learned, home warranty companies do not reimburse for work that has already been completed. These companies contract directly with approved tradespeople and negotiate set pricing with them. Their policies trade speed for cost savings, which means the process often includes multiple steps and administrative requirements. That structure can feel frustrating, especially when an urgent repair is needed, as happened in your godson’s case.