How does a home warranty work? A beginner's guide

by Ann Hayward 06/23/2025

When considering new construction, many potential buyers wonder, "How does a home warranty work?" Either a builder or a separate home warranty company can provide special coverage for specific parts of your new home, similar to the protection offered by insurance.

Here are some of the most important questions and answers about home warranty companies and contracts:

What is a home warranty?

Home warranties are different from homeowners insurance, which protects the property against fires, hail and other serious hazards. Instead, a home warranty covers appliances such as washing machines and dryers, refrigerators and HVAC systems.

How do home warranties work?

When you have a home warranty, you're covered if and when a covered system breaks down. Home warranties provide a guarantee of repairs to your household's appliances or systems as long as the damage occurred as a result of normal use.

How much does a home warranty cost?

The cost of an annual home warranty can vary depending on many factors such as size, features and condition of the home. The cost typically isn't affected by property age, except for newly constructed buildings, which increase costs.

Home warranties are available for owners of other property types as well. Separate structures like hotel rooms or individual apartment units are generally not covered by standard plans, but can be covered at extra costs.

Benefits of a home warranty

For a homeowner with fewer emergency funds who want to make them available for other purposes, home warranties can act as buffers for the homeowner. A home warranty is also useful for homeowners who have less time or interest in DIY repairs and want to have close contact with the professionals.

Is a home warranty right for you? Often, the benefits greatly outweigh the disadvantages. However, it's important to clarify any details of the warranty service contract for full understanding how it affects your covered appliances and systems.

About the Author
Author

Ann Hayward

Born in Philadelphia and raised in the suburbs, Ann Hayward got her Pennsylvania real estate license at age 18 even before going to college. This second-generation real estate professional followed in the footsteps of her father and two uncles, inheriting their passion for the business. Licensed in DC, Maryland and Virginia, Ann is accomplished in her career, with numerous designations including SFR, SRES, PSA, WHC, and multiunit Housing Development Finance Professional (HDFP) from the National Development Council. She specializes in Prince Georges and Montgomery Counties, Northern Virginia and Washington, DC, all jurisdictions where Ann has lived and knows very well. In addition to her professional expertise, she owns and manages personal investment property, understands and has been involved in the renovation/remodeling process, and has great resources which she shares with clients. When you hire Ann to represent you, she will make your buying or selling experience an enjoyable, rewarding one. Her compassion, sensitivity to her clients’ needs, eye for detail, and ability to see the big picture when guiding you through a purchase or sale are unique assets that will ensure your success. A diverse and relevant background also gives Ann a distinct edge. For 30 years, she worked in fast-paced, high-pressure television and theatrical production, attaining the highest achievement – DGA membership as a Director, and as an award-winning staff and freelance writer. Her keen audio visual skills and design sense benefit sellers in marketing their properties, and are invaluable in helping buyers see the potential of space. A true renaissance woman, Ann was also an income tax professional and office manager for H&R Block, so she thoroughly understands the tax and financial implications of acquiring and selling real estate. Her superior organizational skills are further evidenced as owner of a downsizing/professional organizing business, Managed For You, which allows her to connect with everyone from millennials to boomers and seniors, whether for small space planning or assisting with major decluttering and transitioning. Ann holds an AB in American History from Simmons College, Boston, plus attended Robert Wagner Graduate School of Public Administration where she was a candidate for Doctorate. She additionally studied Film Direction at the American Film Institute in LA, and was a Stanford University post-graduate Professional Journalism Fellow. Personally, Ann is an avid if not very good golfer, and the co-founder of a nonprofit 501c3 organization offering educational guidance, tutoring and counseling for youngsters from elementary school through college admission. She sits on the board of trustees of a nonprofit educational film production corporation as well. (202) 494-6252 [email protected]