You can think of a home warranty as a home protection plan, and it is especially useful for a first-time homebuyer with no experience maintaining a home. Click through to see how it works and who will pay for it.

If you're a first-time buyer especially, a home warranty is worth considering. Think of it as a home protection plan. You probably have very little experience maintaining a home. But who should pay for the coverage? You the buyer or the folks you are getting the home from — the seller.

In many locales, it's normal for a seller to pay for the coverage: You as the buyer won't need to call the seller after closing if something breaks. Many real estate agents give buyers a home warranty as a gift at closing.

As a gift? You will not be surprised, then, that home warranty coverage is fairly inexpensive, typically ranging from $300 to $500. Home warranty companies sometimes run special sales, either discounting policy prices or offering additional coverage for the same price.

Policies are prepaid for a year in advance and can be renewed by the homeowner at a slightly higher fee. And what do you get?

  • If a home system or appliance breaks or stops working, the homeowner can call the home warranty company, which in turn calls an approved repair service.
  • If the appliance is malfunctioning and can't be repaired, and you have good coverage, you can have the appliance replaced and installed.
  • You as the holder of the warranty pay a small trade service fee — less than $100 — for the visit.

What will your policy cover? Ask specifically what is covered and quiz your real estate agent to discover whether upgrades are available. Make sure you find out whether the home warranty company pays for repairs to make systems or appliances compliant with new regulations.

Typically Covered

  • Air conditioning.
  • Dishwasher.
  • Doorbell.
  • Furnace or heating system.
  • Water heater.
  • Ductwork.
  • Garbage disposal.
  • Inside plumbing stoppages.
  • Ceiling fans.
  • Electrical system.
  • Range and oven.
  • Telephone wiring.

Typically Not Covered

  • Outdoor items like sprinklers.
  • Faucets, refrigerators, washers, dryers, or garage door openers.
  • Spas and pools, unless you request specific coverage.
  • Permit fees.
  • Haul-aways.
  • Items that were broken before closing.
  • Any exclusions noted in the policy.

What Can Cause a Denial of Payment?

  • Improper maintenance.
  • Preexisting condition disclosed in a home inspection.
  • Code violations.
  • Unusual wear and tear.
  • Improper installation.

But remember — coverage for a home warranty plan varies from state to state and from policy to policy. See a sample copy of a policy before you commit.

Home warranties are designed to cover what home insurance policies won't. They are service contracts that promise to pay for the cost of repair or replacement if covered items — appliances, plumbing, and heating and air conditioning systems — stop working.

Remember that providers of these plans build in wiggle room to make it easier for them not to make payments. Evaluate the likelihood that you'll be able to use your home warranty. And finally, make sure you see whether items inside your home are still covered by the manufacturer's or the builder's warranty.