Home warranty
A paid service contract that covers repair or replacement of major systems and appliances when they break from normal wear.
A home warranty isn't insurance — it's an annual service contract. You pay a premium (the national average is roughly $720 a year, or about $60 a month) and, whenever a covered system or appliance breaks down from ordinary use, you pay a [service-call fee](/glossary/service-call-fee) and the company sends a contractor to repair or replace it. It's different from homeowners insurance, which covers sudden damage from events like fire or storms, not the gradual failure of a 14-year-old water heater. The catch is in the fine print: contracts exclude pre-existing or "known" conditions, cap payouts per item, and deny claims they decide stem from poor maintenance — so the value you actually get back is often well below the sticker repair cost. Whether one pays off is a math question that hinges on the age of your systems, the service fee, and the premium, which is exactly what our [is-a-home-warranty-worth-it calculator](/guides/is-a-home-warranty-worth-it-calculator) works out. For many owners, funneling the same premium into a [sinking fund](/glossary/sinking-fund) self-insures the same risk while keeping the money.