Know how long you’re protected
Home warranty coverage can provide peace of mind that you won’t be on the hook for repair and replacement costs for appliances and home systems. However, they don’t last indefinitely, so you’ll want to make sure yours is still active. In this article, we’ll cover the standard contract length and some factors that can affect it.
A home warranty normally lasts for one year, although it’s not uncommon to see contracts that have two-year or even three-year terms. Some local home warranty companies offer contracts that last five to ten years, although these options are much less common. You’re more likely to see these longer contract terms If a seller offers a home warranty to entice you to buy.
There are a few key things that affect how long your home warranty lasts and how long you actually have coverage.
The contract term is the most important thing to pay attention to when it comes to how long your home warranty lasts. Most home warranty providers offer contracts that default to one year, but you can often choose a shorter or longer term based on how long you want coverage for your home. Common options include two- and three-year plans, and some companies may provide month-to-month coverage, which comes with a variable term.
If your home warranty coverage requires an inspection, then your coverage will usually begin 30 days after you get a home inspection, which can affect when coverage is up.
You can usually renew contracts that end after a year, which means your initial one-year agreement could turn into a two-year agreement or one that lasts even longer. If you expect to renew a one-year contract, though, it’s often beneficial just to go with an agreement that lasts for two years or longer from the beginning, as you can get a multi-year discount, leading to lower effective home warranty costs if you agree to several years up front.
"Transferable home warranties are pretty common. If it’s a buyers market, the seller may offer this for free, covering the transfer costs, as a way to convince a prospective buyer to buy. If it’s a sellers market, the buyer may agree to take on the transfer costs and the warranty almost as a kind of gesture of thanks. For both parties, it generally helps ensure better protection of the home during the process of transferring ownership."
— Seamus Nally, CEO, TurboTenant
Most home warranty agreements have coverage caps, which are the maximum payout amounts your provider will pay during a contract period. Many home warranty companies have coverage caps for individually covered items, as well as a maximum payout for all covered items in total.
Once you hit a coverage cap, your home warranty coverage is effectively up until you renew your contract, so this is another way your contract may effectively end.
There are a few ways to extend your home warranty, depending on the contract term you chose when you initially signed up and why your coverage has come to an end.
Buy an additional year of coverage: If you’re simply coming to the end of your current home warranty plan, you can usually just contact your provider to extend the term for a year. Coverage caps will reset, effectively giving you a new plan that lasts for a year. Some plans may auto-renew, so check with your provider first.
Buy a new home warranty: If you’ve hit your coverage limits and can no longer get service from your home warranty provider, you might be able to purchase a second home warranty to cover additional breakdowns. Some providers have rules against doubling up on coverage, though, so read your contract before going this route.
Upgrade your home warranty plan: Some home warranty providers have tiered plans, with the more expensive options including a wider range of coverages and, often, higher coverage caps for those covered items. If your coverage has effectively come to an end due to hitting your coverage caps, you can sometimes “extend” the coverage by upgrading to a plan with higher caps.
Most home warranties cover either home appliances or home systems, and some cover both. Appliance packages will usually include protection for all kitchen appliances, like refrigerators, ovens, stoves, built-in microwaves, and dishwashers, with some covering washing machines and dryers. Systems-only plans normally cover the plumbing, electrical, and HVAC systems, as well as most of the components. Combination plans cover the major appliances in addition to home systems.
Most home warranty companies will accept either monthly payments throughout your contract term or a one-time payment upfront that covers all monthly payments for the entire contract. In most cases, paying for the home warranty contract in full up front will mean paying less in the long run, as most providers offer a discount for full-contract payments. Keep in mind that, in either case, you’ll still likely have some costs throughout the life of your coverage, like paying service fees for each service call you make and paying repair and replacement costs after you reach your coverage limits.
Most home warranties exclude aesthetic damage, pre-existing issues, intentional damage, and issues that stem from a lack of proper maintenance. Home warranty companies also have contract terms that can exclude specific types of HVAC systems or certain components of an appliance or home system, so you should read your contract in its entirety to make sure you understand your coverage before signing up.
