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What Is a Home Warranty Company?

Paul Cody Hillel
Paul CodyPublished April 6, 2021
Home Warranty Company

Though it’s easy to forget in the bustle of day-to-day life, we depend on all kinds of home systems and appliances to keep our homes safe and comfortable. Our lives would be very difficult without reliable plumbing or electricity, or without a functioning refrigerator or stovetop.

Of course, these systems and appliances can and do malfunction from time to time. Repair can be exceedingly costly, and a standard homeowner’s insurance policy will rarely cover home equipment that breaks down after years of normal wear and tear.

When homeowners started to look for convenient, affordable ways to protect their homes, home warranty plans emerged as an effective solution.

A home warranty is a service contract that helps homeowners maintain, repair, and even replace critical home components. A home warranty provider is a company that issues these contracts and manages a homeowner’s claim when an appliance or system requires professional service.

A home warranty has the potential to save you thousands in the long term. It can also simplify your budget, offer peace of mind, and even raise the value of your home. But there is substantial variety among home warranty providers and plans. Let’s take a closer look at the home warranty world so you can make an informed decision about purchasing your own home warranty protection.

In this guide, you will learn:

How much does a home warranty cost?

The home warranty service business model is similar to that of insurance. The homeowner pays into a plan each month or year to maintain home warranty coverage. When something breaks down, the homeowner submits a claim to have it repaired. The warranty provider then finds a licensed technician and pays to have the system or appliance serviced or replaced.

The average home warranty plan has two main costs associated with it. First is the premium. This is the fixed amount you pay each month or year to keep your plan active. The price of the premium depends on both the company and specific policy. A plan with more expansive coverage or luxury coverage will have a higher premium. But for most plans, the premium ranges between $25 and $50 per month, or between $300 and $600 per year.

The second main expense is the service fee. This is analogous to the copay on your insurance plan. The service fee is due only when you submit a claim to have something in your home repaired. A typical service fee is between $75 and $150.

There are other costs to consider as well. Some plans include a deductible, or a dollar amount you need to pay before the plan starts to pay out. Other plans have coverage limits. These are caps on the amount the provider will pay within a certain period of time.

Before agreeing to a policy, it’s important to have a frank discussion with your potential warranty provider so you can fully understand how much you’ll need to pay to protect your home. The goal, after all, is to spend less on warranty costs than you would have spent on home repair if you were not covered.

What is an extended warranty or service contract?

Most appliances, big and small, are protected by a manufacturer’s warranty for a limited time after purchase.

A new refrigerator, for example, might have a limited warranty of one year, and if the refrigerator fails in that first year, the manufacturer will cover the cost of parts and labor required for repair.

An extended warranty or service contract is meant to prolong an appliance’s coverage when the manufacturer’s warranty expires. Some manufacturers offer their own extended warranties, service contracts, or protection plans. Others partner with third parties to underwrite coverage. Often, you can also find extended warranty coverage through home appliance warranty companies.

To be clear, a manufacturer’s warranty poses no additional cost for the consumer. An extended warranty, though, does require payment. This could be a one-time expense or a monthly or yearly fee.

How do home warranties differ from extended warranties or service contracts?

A home warranty and extended warranty operate on similar principle. With each, you are paying a modest amount of money to insure against the risk of expensive repair.

The main difference between a home warranty and extended warranty is the scope of coverage. An extended warranty covers a single appliance. A home warranty, on the other hand, can cover virtually every appliance in your home. Standard plans protect major kitchen and laundry appliances, but you can find coverage for electronics, generators, air conditioners—you name it.

How to choose a home warranty provider?

While price is an obvious consideration when shopping for a home warranty, it should be only one of many factors that influence your decision.

You should also compare home warranty companies by reading impartial reviews online. Find trusted, reputable companies and organizations, such as Google or the Better Business Bureau. When visiting review sites, check for advertising disclosures. Many review sites solicit financial compensation from the companies they write about, which leads to biased and specious rankings.

Check that your potential warranty provider has not been accused of fraud or other illegal or unethical practices. And know that different states have their own laws and regulations that apply to the home warranty industry. You should confirm your potential provider is licensed to operate in your state.

Make sure you’re aware of all the costs associated with your potential plan, from the premium and service fee to the less obvious expenses. Discuss with your provider the different items and circumstances that are and are not covered by your policy.

Finally, the best home warranty company for you should be flexible. No two homes are exactly alike. No two warranties should be either. Take stock of everything in your home that you would like to protect. Identify appliances and systems that may still have coverage from a manufacturer’s warranty, builder’s warranty, or other guarantee. Your policy should provide coverage only for the items that need it.

Finding the right home warranty for you may take time, but you will be rewarded for your diligence.

Why are compliant home warranty companies so important?

The home warranty industry is highly regulated, and different states have their own requirements for licensure. Unfortunately, there are some fly-by-night companies that skirt state regulations or sell services without an appropriate license.

Regulatory compliance means the consumer can hold the warranty company accountable. Many states require home warranty providers to put up financial securities. This makes it much easier to penalize the company if it unrightfully denies a claim or defrauds consumers. In short, companies that evade regulations are more likely to get away with unethical or illegal practices.

What can Liberty Home Guard offer?

We started Liberty Home Guard to improve the home warranty experience for homeowners across the United States. And we’ve succeeded. We’re not only the Better Business Bureau’s highest rated provider; we’re the only provider with an A+ rating.

We regularly update our blog with new information on home warranties and home maintenance to give homeowners the knowledge they need to better protect their most important asset.

You can also learn more about the right home warranty for you by talking with our team. Call (866)-748-2399.

Home Warranty PlansPublished April 6, 2021

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