Last Updated on October 18, 2026 by Syed Sarim Naqvi
A home warranty is not insurance but a service contract that pays to repair or replace appliances and home systems that break from normal wear, typically for $300 to $600 a year plus a $75 to $125 fee each time a technician visits, according to Consumer Reports figures cited by Opendoor. The catch is the fine print: pre-existing conditions, maintenance disputes and per-item caps drive denials, and the FTC warns a warranty may duplicate cover you already have.
Key Takeaways
- The FTC calls home warranties “really service contracts” and says they may duplicate cover you already have, cover only part of a product or make repairs hard to get
- Typical cost is $300 to $600 a year for basic plans, with This Old House reporting $540 to $865 and Mortgage.com $300 to $700, plus $75 to $125 per service call
- A Consumer Reports survey cited by Opendoor found 44% of holders had claims denied or only partly paid
- Claims are commonly denied for pre-existing conditions, poor maintenance or improper installation, and replacements may be paid at depreciated value
- Coverage does not start the day you buy it: This Old House notes there is usually a waiting period, and a warranty is not required at closing
What Is a Home Warranty?
The FTC’s consumer alert explains that home warranties typically cover repairs and replacements for items such as appliances or air conditioning systems, with options and price depending on the company. Mortgage.com says they are optional, and the appeal is paying a service fee instead of the full repair bill. The DC Attorney General’s office warns that warranty companies often require multiple steps before agreeing to repair, that a delay can cost you money or hardship, and that many covered repairs may cost less than the price of the warranty.
How Is It Different From Homeowners Insurance?
Herring Bank describes the practical difference: homeowners insurance covers sudden, unexpected damage such as fire, storm, theft or a pipe that bursts from freezing, while a warranty covers breakdowns of listed systems and appliances. Mortgage.com adds that damage from a flood, hurricane or fire usually falls under homeowners insurance. Because they cover different events, having both means neither fills the other’s gap.
| Feature | Home Warranty | Homeowners Insurance |
|---|---|---|
| What it is | A service contract | An insurance policy |
| Covers | Wear-and-tear breakdowns of systems and appliances | Sudden damage, theft, liability |
| Cost to use | Service fee of $75 to $125 per visit | Deductible per claim |
| Required at closing | No | Usually, if you have a mortgage |
| Common denial reasons | Pre-existing issues, maintenance, caps | Excluded perils such as flood |
How Much Does a Home Warranty Cost?
Consumer Reports figures cited by Opendoor say basic plans cost $300 to $600 a year and comprehensive plans with add-ons $500 to $1,500, with service fees of $75 to $125 per visit. This Old House reports typical costs of $540 to $865 a year, or $45 to $72 a month. Herring Bank lists American Home Shield’s systems plan at about $588 to $948 a year and Choice Home Warranty’s basic plan at about $552 to $780. Mortgage.com says add-ons such as pool equipment can add $40 to $200 or more a year. As an illustration, not a quote, a $300 to $600 basic plan plus two service calls at $75 to $125 would cost about $450 to $850 for the year.
Why Are Claims Denied?
Consumer Reports found a claim may be denied because of poor maintenance, improper installation or a pre-existing problem, even if the problem was not evident when you bought the plan, and that even when a replacement is approved the company may pay only the depreciated value, leaving you to cover the difference. Herring Bank notes that if a technician diagnoses a pre-existing failure and denies the claim, you have still paid the service fee, and that an older home may generate several service calls a year.
What Do Consumer Groups Suggest?
Consumer Reports has long recommended putting the money you would spend on a warranty into a savings account for repairs and replacements, and says to check first whether items are covered by a manufacturer’s warranty, a builder’s warranty or a credit card that extends warranties. The same coverage warns about scam letters claiming your home warranty is expiring even if you never had one, and advises contacting a company using a number you know is real. A consumer lawyer quoted by Consumer Reports said a warranty may make more sense when the home and appliances are older.
What Should You Check Before Buying?
- Existing cover: manufacturer, builder and credit card warranties
- Caps: the per-item and per-year limits in the contract
- Exclusions: pre-existing conditions, maintenance and installation
- Waiting period: This Old House says coverage does not start when you buy the plan
- Company: the FTC says a warranty is only as good as the company behind it
How Does This Connect to Other Home Cover?
For sudden damage and storm risks see Water and Sewer Backup Insurance Explained and Hurricane and Wind/Hail Deductibles Explained. Buyers should also read Title Insurance Explained, condo owners Condo Insurance (HO-6) Explained, and luxury owners High-Value Home Insurance Explained.
FAQ
Is a home warranty insurance?
No. The FTC calls it a service contract.
How much does it cost?
About $300 to $865 a year depending on the source and plan, plus $75 to $125 per service call.
Does it cover pre-existing problems?
Generally not, according to Consumer Reports.
Is it required when buying a home?
No. A warranty is not required at closing.
How often are claims denied?
A Consumer Reports survey cited by Opendoor found 44% of holders had claims denied or partly paid.
Does it pay full replacement value?
Not always; some pay only depreciated value.
Where do I report problems?
The FTC asks consumers to report bad experiences at ReportFraud.ftc.gov.
Glossary
- Service contract: a paid agreement to repair or replace listed items.
- Service call fee: the flat fee charged per technician visit.
- Pre-existing condition: a problem that existed before the contract began.
- Coverage cap: a maximum payout per item or per year.
- Waiting period: the delay before coverage starts.
Sources
- FTC Consumer Alert: So What’s the Deal With Home Warranties? (service contract, duplication, limits)
- DC Attorney General: Home Warranty Tips (required steps, delays, low-cost repairs)
- Consumer Reports: What to Know About Buying a Home Warranty (savings advice, depreciated value, denials)
- WSLS: Consumer Reports, What Do Home Warranties Really Cover? (July 2026, scam letters)
- Opendoor: Are Home Warranties Worth It? (Consumer Reports cost figures, 44% denials)
- This Old House: What to Ask When Buying a Home Warranty ($540 to $865, waiting period)
- Herring Bank: Home Warranty Cost (plan prices, service fee, insurance difference)
- Mortgage.com: What Is a Home Warranty? (cost, add-ons, disasters)
Related reading: Umbrella Insurance Explained · Gap Insurance Explained · Landlord Insurance Explained
Published October 2026. Prices and plan terms vary by company and change often; always read the exclusions, caps and waiting period, and refresh this article periodically.
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