Home Warranty

Example

“When Lisa's air conditioning unit stopped working during summer, her home warranty covered the $3,200 replacement cost for just a $75 service call fee.”

Memory Tip

Remember 'Warranty = Wear-and-tear Remedy' - it fixes things that wear out, not things that get damaged by disasters.

Why It Matters

Home warranties provide predictable costs for unpredictable appliance and system failures, helping homeowners budget for maintenance expenses and avoid large unexpected repair bills. For many homeowners, especially those with older homes or appliances, the peace of mind and potential savings make home warranties a valuable investment in property management.

Common Misconception

Many people confuse home warranties with homeowners insurance, thinking warranties cover damage from storms, theft, or accidents, when they actually only cover mechanical breakdowns from normal use. Others assume all repairs are fully covered, but most warranties have service fees, coverage limits, and exclusions for pre-existing conditions or lack of maintenance.

In Practice

Tom purchases a $600 annual home warranty with a $100 service fee per claim. During the year, his refrigerator breaks ($800 repair), his garbage disposal fails ($200 replacement), and his furnace needs major repairs ($1,500). Instead of paying $2,500 for these repairs, Tom pays his $600 warranty cost plus $300 in service fees (three claims × $100), saving $1,600 while gaining peace of mind for future breakdowns.

Etymology

The term combines 'home' with 'warranty,' which comes from the Old French 'warantie' meaning a promise or guarantee of protection.

Common Misspellings

Related Terms

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Other insurance terms you should know

See Also