How a home warranty works
You pay a monthly or annual premium for a one-year contract. When something covered breaks, you file a claim with the company, which typically sends a contractor from its network, and you pay a fixed service fee for the visit. If the repair is approved, the company pays the rest, up to the contract’s limit. If it decides the item can’t be fixed, it may replace it or offer cash instead.
Plans usually come in tiers: one for home systems (heating, air conditioning, plumbing, electrical, water heater), one for appliances (refrigerator, oven, dishwasher, washer and dryer) and a combined plan. Pools, septic systems and well pumps are usually add-ons.
Home warranty vs. homeowners insurance
| Home warranty | Homeowners insurance | |
|---|---|---|
| What it pays for | Repairs from normal wear and tear on covered items | Damage from sudden events such as fire, storms or theft |
| Who regulates it | Varies by state; often the insurance department | State insurance departments |
Source: California Department of Insurance; ConsumerAffairs. Checked October 2026.
The California Department of Insurance says home protection contracts “do not overlap or replace” a homeowners policy. Weather and natural-disaster damage is typically excluded from warranties. For that, see our homeowners insurance guide.
What it costs
NerdWallet’s 2026 research, based on quotes from 19 companies, found an average price of $73 a month (about $876 a year), with plans ranging from $28 to $191 a month. The average service fee was about $108 per visit, with some plans charging nothing and others up to $200. Price depends on your ZIP code, the plan tier, add-ons, your home’s size and the service fee you pick: a higher fee usually means a lower premium.
Compare that with typical repair bills. SoFi puts the average heating or air conditioning repair at about $350 and a water heater repair or replacement at about $606. A year with two covered claims at the averages above would cost roughly $1,092 in premium and fees, so a warranty pays off mainly when a large system fails, not for small repairs.
Where plans really differ
- Coverage caps. Limits can be per item, per system or per contract term. Published caps range from $500 per appliance on some plans to $5,000 for heating or cooling on others. A cap below the cost of a new HVAC system leaves you paying the difference.
- Exclusions. California’s regulator warns that all home warranties contain “dozens of exclusions.” Common ones are pre-existing conditions, lack of maintenance, rust or sediment, cosmetic damage and items still under a manufacturer’s warranty.
- Waiting period. Many plans won’t pay claims for the first 30 days.
- Denied claims still cost money. The service fee is usually owed even if the claim is turned down.
- Payout method. Some contracts pay depreciated value or cash in place of a replacement.
How to choose
- List what could fail. Older HVAC equipment and appliances out of manufacturer warranty are where coverage has the most value.
- Read the sample contract, not the brochure. Find the cap for each item you care about, the exclusions, cancellation terms and how long the company has to send a technician. California requires service to begin within 48 hours of a request.
- Check the company’s record. The FTC suggests searching the company name with “review” or “complaint.” Also check your state regulator: Arizona’s attorney general announced an $11.8 million settlement with Choice Home Warranty in February 2026 over alleged claim practices, which the company denied.
- Compare against self-insuring. Setting aside the premium in an emergency fund covers smaller repairs without exclusions.
Our home warranty companies guide compares named providers’ prices, caps and enforcement history.
Common mistakes
- Assuming a warranty covers storm, flood or fire damage. It doesn’t; that’s insurance.
- Skipping maintenance. Missing records can lead to denials for “lack of maintenance.”
- Paying for duplicate coverage. The FTC notes that new appliances or a builder’s warranty may already cover the same items.
- Ignoring cancellation terms. The FTC suggests checking for cancellation restrictions and fees before you sign.
Where to get help
If a company won’t honor its contract, contact your state insurance department or attorney general. In California, you can check a company’s license at 1-800-927-4357. You can also report problems to the FTC at ReportFraud.ftc.gov.
Guides in this section
Frequently asked questions
Is a home warranty the same as homeowners insurance?
No. A home warranty is a service contract that pays to repair covered systems and appliances that wear out. Homeowners insurance covers sudden damage such as fire, storms or theft. California's insurance regulator says warranties do not overlap or replace a homeowners policy.
How much does a home warranty cost?
NerdWallet's 2026 research found an average of $73 a month, with plans from $28 to $191 a month depending on location and coverage. You also pay a service fee for each repair visit, averaging about $108.
Do I pay the service fee if my claim is denied?
Usually yes. Many contracts charge the service fee for the technician's visit even if the company later denies the claim. Check the contract terms before you buy.
What do home warranties usually exclude?
Common exclusions include pre-existing conditions, damage from lack of maintenance, rust or sediment, weather and natural disasters, cosmetic issues and items still under a manufacturer's warranty. Coverage caps also limit how much the company pays.
Who do I complain to about a home warranty company?
Contact your state insurance department or attorney general, since regulation varies by state. You can also report problems to the FTC at ReportFraud.ftc.gov.
Sources
- FTC – So what's the deal with home warranties?
- California Department of Insurance – Home Protection Contracts
- NerdWallet – How much does a home warranty cost in 2026?
- ConsumerAffairs – How are home warranties regulated?
- Arizona Attorney General – $11.8 million settlement with Choice Home Warranty
- NerdWallet – American Home Shield review
- NerdWallet – Select Home Warranty review
- SoFi – Most common home repair costs
Rates, fees and terms change often. Figures were checked in October 2026; confirm current details with the provider before you apply.