Home warranties: what they cover, what they don't, and whether a first-time buyer needs one

A home warranty is not insurance. Homeowners insurance covers the house against things that happen to it — fire, a tree through the roof, a burst pipe flooding the basement. A home warranty is a service contract that covers things that wear out: the furnace that dies in January, the water heater that starts leaking in year 12, the dishwasher that quits.

It is sold heavily to first-time buyers for a reason: you have just spent every dollar you have, you inherited a house full of systems you did not choose, and a $6,000 furnace replacement in month three is the nightmare scenario. Whether it is worth it depends almost entirely on the age of what you bought.

What a typical plan covers

• Heating system and ductwork; central air if you add the systems-plus tier.
• Water heater, plumbing stoppages and leaks inside the house, sump pump on many plans.
• Electrical system: panel, wiring, outlets, switches.
• Kitchen appliances: range, oven, dishwasher, built-in microwave, refrigerator (sometimes an add-on).
• Washer and dryer, usually on the appliance or combo tier.

What it almost never covers

• Anything that was already broken or improperly installed — 'pre-existing conditions', which is why an inspection report matters.
• The roof, the foundation, windows, and structural anything.
• Cosmetic damage, and 'code upgrades' the tech says are required before the repair.
• Well pumps, septic, pools and spas unless you buy the add-on.
• The full replacement cost of a high-end unit: plans carry per-item caps, commonly $1,500–5,000.

The real math

Plans run roughly $45–80 a month, or $500–900 a year paid up front, plus a service fee of $75–125 every time a technician comes out. On a house where the furnace, water heater and appliances are all under ten years old, you will probably pay more in premiums than you claim. On a house with a 20-year-old furnace and original appliances, one claim pays for three years of coverage.

The best version of a home warranty for a first-time buyer is the one someone else pays for. Ask for it in your offer — sellers in Massachusetts routinely agree to a one-year plan as a concession — or put 'Home warranty (first year)' on your jar and let a relative fund the peace of mind.