Home warranty vs. homeowners insurance
People often confuse the two. They cover different things, and one does not replace the other.
| Home warranty | Homeowners insurance | |
|---|---|---|
| What it covers | Breakdowns from normal wear and tear: HVAC, plumbing, electrical, water heater, appliances | Sudden damage from covered perils such as fire, wind, theft, plus liability |
| Legal form | Service contract | Insurance policy |
| Required? | No | Usually required by your mortgage lender |
| What you pay per claim | A flat service fee per visit | A deductible |
| Weather and disasters | Generally excluded | Covered depending on the peril and policy |
Source: FTC consumer alert on home warranties (Feb. 2023); California Department of Insurance, Home Protection Contracts; NerdWallet American Home Shield review (Apr. 2026).
The California Department of Insurance puts it plainly: home warranties "do not overlap or replace a homeowners' insurance policy." If a storm knocks a tree onto your AC unit, that's an insurance claim. If the compressor dies at age 14, that's a warranty claim. For the insurance side, see our guide to the best home insurance companies.
What home warranties cost
You pay two things: the plan price (monthly or yearly) and a service fee each time a technician comes out. The service fee is usually charged even if the claim is denied.
| Company | Published plan prices | Service fee per visit | Where sold |
|---|---|---|---|
| American Home Shield | About $29.99–$119.99/month, depending on plan and location | $100 or $125 (your choice) | 48 states and D.C. (not AK, HI) |
| Choice Home Warranty | Basic $49.17/month; Total $57.50/month ($590–$690 a year) | $100 | 49 states (not WA) |
| Select Home Warranty | About $60–$64/month quoted; $479.99 for a discounted one-year quote | Reported $65–$200, depending on contract length | 46 states |
Source: NerdWallet reviews of American Home Shield (Apr. 17, 2026), Choice Home Warranty and Select Home Warranty (May 29, 2026), based on quotes NerdWallet collected. Your price depends on your ZIP code, home size and add-ons.
Optional add-ons such as pools, septic systems, well pumps and second refrigerators cost extra. A lower service fee usually means a higher monthly price, and the reverse.
Caps and exclusions: where plans really differ
Every plan limits how much it will pay. Some caps are per item, some per system, and some per contract term. A low cap can turn a "covered" AC replacement into a small credit toward a bill you mostly pay yourself.
| Item | American Home Shield | Choice Home Warranty | Select Home Warranty |
|---|---|---|---|
| Heating and AC | Up to $5,000 each for AC, heating and ductwork | $3,000 combined | $3,000 combined, per term |
| Plumbing | Not specified in review | $3,000 | $500 |
| Electrical | Not specified in review | $3,000 | $500 |
| Appliances | Up to $4,000 each (ShieldPlatinum) | $3,000 each | $500 each |
Source: NerdWallet company reviews (Apr. and May 2026), based on sample contracts. Caps can differ by state and plan; check your contract.
Common exclusions across companies include:
- Pre-existing conditions: problems that existed before coverage started.
- Weather and disasters: floods, freezes, fires and power surges.
- Cosmetic and physical damage: dents, missing parts, misuse.
- Routine maintenance: filter changes, cleaning.
- Items under a manufacturer's warranty or recall.
- Rust, corrosion and sediment: Select excludes these. American Home Shield is unusual in covering rust, corrosion, sediment, improper installation and lack of maintenance.
- Access and haul-away costs: some contracts don't pay to open walls to reach pipes or wiring, or to haul away old units. Check this section of the contract.
Watch for "cash in lieu" clauses too. Companies may pay you a set amount instead of repairing or replacing an item, and the payment may not cover the full cost. Select may pay based on depreciated value. The California Department of Insurance warns that "all home warranties contain dozens of exclusions."
Waiting periods and repair guarantees
Most plans have a waiting period before you can file a claim. American Home Shield's is 30 days after payment processes. Repair guarantees are short: 30 days at American Home Shield and Choice, according to NerdWallet's reviews.
How home warranties are regulated
There is no single federal regulator. The FTC enforces general consumer protection law, and states decide the rest. Rules vary widely:
- California treats them as "home protection contracts." The Department of Insurance licenses companies and investigates complaints. Contracts must spell out covered items, exclusions, fees and renewal terms, and service must start within 48 hours of a request. You can check a company's license and complaint summary on the department's website or by calling 1-800-927-4357.
- Florida (Office of Insurance Regulation), New York (Department of Financial Services) and Oregon (Department of Consumer and Business Services) also oversee home warranty companies.
- Some states have little or no specific regulation, so your main protection is the contract and the company's track record.
The companies: published facts and enforcement history
American Home Shield
American Home Shield is owned by Frontdoor, Inc., which said in December 2024 that AHS had about two million members. In December 2024, Frontdoor bought rival 2-10 Home Buyers Warranty for $585 million. AHS offers three tiers: ShieldSilver (systems only), ShieldGold (adds kitchen appliances and laundry) and ShieldPlatinum (adds roof leak repairs and higher appliance caps). Its higher caps and coverage of rust and poor maintenance are its main differences.
Choice Home Warranty
Choice sells two all-in-one plans, Basic and Total, with flat $3,000 caps on most systems and appliances. It has a long enforcement record:
- New Jersey, 2015: Choice's operator, CHW Group, settled with the state for $779,913.93 after 1,085 complaints. The state alleged deceptive claim denials, including demands for years of maintenance records. Choice had to disclose that its products are service contracts, not warranties, and accept a compliance monitor.
- Arizona, 2026: In February 2026, Arizona's attorney general announced an $11.8 million settlement. The state alleged Choice failed to replace AC units and appliances it advertised as covered and that phone sales staff didn't disclose exclusions. Choice denied the allegations and admitted no wrongdoing, but agreed to change its sales practices. Arizona customers who bought by phone between 2013 and 2023 may be eligible for restitution.
Select Home Warranty
Select sells Bronze (appliances), Gold (systems) and Platinum (both) plans and often advertises discounted first-year prices. Its caps are much lower than the others: $500 for plumbing, electrical and each appliance per contract term. NerdWallet's May 2026 review noted a pattern of customers reporting trouble canceling contracts. Read the cancellation terms before signing.
When a home warranty may pay off: an example
Take Choice's Total plan at $690 a year with a $100 service fee. Repair costs below are typical ranges from SoFi's 2026 home repair guide.
| Scenario | Repairs needed | You pay with the plan | You'd pay without it |
|---|---|---|---|
| Bad year | AC repair ($1,500) and water heater ($606) | $690 + $200 in fees = $890 | $2,106 |
| Quiet year | One average heating/AC repair ($350) | $690 + $100 = $790 | $350 |
| No repairs | None | $690 | $0 |
Source: plan price from NerdWallet's Choice Home Warranty review (May 2026); repair costs from SoFi (AC repair $130–$2,000; average heating/AC repair $350; water heater average $606). Example assumes both claims are approved.
A plan tends to make more sense if your HVAC and appliances are old, you bought a home with unknown history, or a surprise $2,000 bill would push you into credit card debt. It tends to make less sense if your systems are new or still under manufacturer warranty, or if you can self-insure. Putting the yearly premium into a dedicated emergency fund covers the same risk with no exclusions. Remember that the "bad year" only pays off if the claims are approved and fall under the caps.
How to compare plans before you buy
- Get the sample contract for your state. Read the limits and exclusions sections first, not the marketing page.
- Compare caps for the items you're worried about. If your AC is the big risk, a $5,000 cap and a $3,000 combined cap are very different.
- Add up the true yearly cost. Plan price plus the service fee times the number of calls you expect.
- Check the company's record. The FTC suggests searching the company name with "complaint" or "review." Also check your state insurance department and attorney general for actions.
- Read the cancellation terms. Look for cancellation fees and how refunds are calculated.
- Be wary of unsolicited sales calls. Arizona's case against Choice centered on what phone sales staff left out, so get the full contract in writing before you pay.
If you're buying a home, a warranty is often offered at closing. Ask whether the seller will pay for the first year, and review the house's insurance needs at the same time with our guide to homeowners insurance before you buy. For more on the basics, see our home warranty overview. If you have a bad experience, you can report it to the FTC at ReportFraud.ftc.gov and to your state insurance department.
Frequently asked questions
Is a home warranty the same as homeowners insurance?
No. A home warranty is a service contract that covers breakdowns from normal wear and tear. Homeowners insurance covers sudden damage such as fire, wind and theft, plus liability. The California Department of Insurance notes that home warranties do not overlap or replace homeowners insurance.
How much does a home warranty cost?
NerdWallet's 2026 reviews found American Home Shield at about $29.99 to $119.99 a month, Choice at $49.17 to $57.50 a month, and Select at about $60 to $64 a month before discounts. You also pay a service fee of roughly $65 to $125 per visit.
Do I pay the service fee if my claim is denied?
Usually yes. American Home Shield, Choice and Select all charge the service fee for the technician visit even if the claim is denied, according to NerdWallet's reviews. Check your contract.
What do home warranties not cover?
Common exclusions include pre-existing conditions, weather and natural disasters, cosmetic damage, routine maintenance, and items under a manufacturer's warranty. Many plans also exclude rust, corrosion and sediment, and some don't pay to access pipes behind walls or haul away old units.
Has Choice Home Warranty faced legal action?
Yes. It settled with New Jersey for about $780,000 in 2015 and with Arizona for $11.8 million, announced in February 2026. Choice denied Arizona's allegations and admitted no wrongdoing.
Who regulates home warranty companies?
States do, and rules vary. California's Department of Insurance licenses home protection companies and posts complaint data. Florida, New York and Oregon also oversee them. There's no single federal regulator, but the FTC enforces general consumer protection law.
Sources
- FTC – So what's the deal with home warranties?
- California Department of Insurance – Home Protection Contracts
- Arizona Attorney General – $11.8 million settlement with Choice Home Warranty
- New Jersey Attorney General – Settlement with Choice Home Warranty (2015)
- Business Wire – Frontdoor completes acquisition of 2-10 Home Buyers Warranty
- NerdWallet – American Home Shield review
- NerdWallet – Choice Home Warranty review
- NerdWallet – Select Home Warranty review
- ConsumerAffairs – How are home warranties regulated?
- SoFi – What are the 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.