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Home Warranty


A home warranty is a service contract that covers the repair or replacement of important home system components and appliances that may break down over time. It typically covers items like electrical, plumbing, heating and cooling systems, as well as appliances like refrigerators, dishwashers, and ovens. Home warranties are usually purchased for a specific time period, such as one year.


The phonetic pronunciation of “Home Warranty” is: “hohmˈ wɔːrənti”

Key Takeaways

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  1. Protection for Home Systems and Appliances: Home warranty provides cover for repair or replacement costs of many major home systems like HVAC, plumbing, electrical, and appliances that might get damaged due to regular wear and tear.
  2. Saving on Repair Costs: Homeowners can save significantly on potential repair or replacement costs as many expensive items are covered under a standard home warranty plan. These can include refrigerators, ovens, or heating systems.
  3. Peace of Mind: Home warranties can alleviate stress by providing protection over unforeseen repair expenses. This can be especially beneficial for those who do not have a large emergency fund set aside for sudden home-related costs.



A home warranty is crucial in the realm of business and finance as it offers homeowners a safeguard against potential expenses resulting from the breakdown or malfunction of major home systems and appliances. These warranties, which are service contracts that last typically for one year, cover the replacement or repair costs of major components such as HVAC systems, plumbing, electrical systems, and kitchen appliances. As such, they provide homeowners a sense of financial security and peace of mind by minimizing unexpected costs, facilitating budget management, and making home maintenance more predictable. Understanding and incorporating a home warranty in a homeowner’s financial planning can be a strategic move in managing long-term property costs.


The main purpose of a home warranty is to provide a homeowner with protection against costly, unplanned expenses connected to home appliances’ breakdown and system failures. A home warranty is intended to lessen financial stress and provide convenience when a covered item fails and needs repair or replacement. While home insurance typically covers damage from natural disasters, theft, and other home-related incidents, a home warranty covers systems and appliances such as heating, cooling, plumbing, and electrical systems, including regular wear and tear.A home warranty is frequently used when buying or selling a home to provide the buyer with peace of mind regarding the covered systems and appliances’ functional state. For example, if the HVAC system fails after purchase, a home warranty can save the new homeowner the cost of a new system. The warranty is especially beneficial for buyers of older homes that may have aged appliances or systems. Sellers also use home warranties to make their home more attractive and to protect the property until it’s sold.


1. ABC Home Warranty Company: This company offers comprehensive warranties for homeowners. If a significant system like plumbing or electrical wiring breaks down, the homeowner can make a claim under the warranty. The home warranty company would then cover the costs to repair or replace the broken system. This not only saves the homeowner potentially thousands of dollars but also reduces the hassle involved in finding and vetting contractors.2. XYZ Real Estate Transaction: As part of a home sale, the seller may choose to provide the buyer with a one-year home warranty to incentivize the sale. This warranty would cover any unexpected repairs or appliance replacements that need to occur within the first year after purchase. This can make a property more appealing to potential buyers as it offers some financial protection after the home purchase.3. City Housing Programs: In some cities or states, there are programs where a home warranty is provided when you buy a house in certain areas. For example, a city trying to improve a neighborhood might offer home warranties to any buyers who invest in that area. These warranties could cover key home systems and appliances, reducing the financial risk for homeowners and encouraging more people to invest in the neighborhood.

Frequently Asked Questions(FAQ)

What is a Home Warranty?

A home warranty is a service contract that covers the repair or replacement of important home system components and appliances that may break down over time.

Is a Home Warranty the same thing as Home Insurance?

No, home insurance protects against damages and loss caused by unforeseen events like fires, theft, or natural disasters. Home warranties, on the other hand, provide coverage for systems and appliances broken as a result of wear and tear.

How does a Home Warranty work?

When a covered appliance or system breaks, the homeowner contacts the home warranty company, which sends a service provider to inspect the issue. If the problem is covered by the warranty, the company will pay for repairs or replacement.

How long does a Home Warranty last?

Most home warranties last for a year, but the length can vary depending on the contract. Many companies offer you the option to renew your warranty at the end of your term.

What systems and appliances are typically covered under a Home Warranty?

Commonly covered items include plumbing systems, electrical systems, heating and cooling systems, washer and dryer, kitchen appliances such as the fridge, stove/oven, dishwasher, garbage disposal. Certain companies might offer coverage for items like pools, spas, and well pumps.

How much does a Home Warranty cost?

The cost of a home warranty typically ranges from $300 to $600 annually, depending on the level of coverage. There may also be a service fee for each repair needed.

Should I get a Home Warranty?

This depends on several factors including the age of your home, the condition of your appliances, your level of comfort handling home repairs, and your financial capacity to handle unexpected home repair expenses.

Can I add or remove items from my Home Warranty coverage?

Yes, most home warranty companies allow you to modify your plan to suit your specific needs by adding or excluding coverage for certain systems or appliances.

Related Finance Terms

  • Service Agreement
  • Appliance Coverage
  • Home Systems Coverage
  • Claim Service Fee
  • Warranty Provider

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