In the strictest legal sense a warranty of any kind within the United States must adhere to guidelines set at the states' and federal government's levels. However, the words "home warranty" are not always used explicitly to mean a legal warranty is being conveyed. In many cases, at least in the United States, a home warranty is not a warranty at all, but rather a home service contract that covers the repair and/or replacement costs of home appliances, major systems such as heating and cooling, and possibly other components of a home, structural or otherwise. The home service contract generally covers home systems such as the home’s plumbing or electrical, and appliances like dishwashers that fail from old age/normal wear and tear. Coverage varies significantly across home warranty companies. Home warranty contracts do not cover all home repairs.
Some home warranty companies have an overall limit set, where anything in the contract is covered up to a certain amount of money. Once the company has paid that amount of money they will no longer pay for the repairs and replacements of home. Other home warranty companies have limits on certain items in the home. In these contracts, if there isn’t a limit stated on an item, the item has no limit and the home warranty will pay as much as needed to repair or replace the system or appliance. Homeowners should read through a home warranty contract to know what limits are set on their coverage.
''Home warranty'' is one of several terms for a contract between home owners and companies that cover some of the costs associated with specific repairs and replacements of household objects. Related industries often use such terms as ''residential service contract'' and ''appliance warranty plan''. Just as is the case with home warranty in states such as Florida,[http://www.floir.com/Sections/Specialty/is_sp_index.aspx Specialty Product Administration]. Retrieved October 19, 2014. residential service contracts are regulated in some states such as Texas.[http://www.trec.state.tx.us/licenses/RSC_info.asp The Residential Service Company Program]. Retrieved October 19, 2014. It is of value for consumers to understand their state's regulations for companies that offer to provide maintenance or repair services and/or coverage for related costs since some companies may be operating without proper licensing. Consumers may sometimes avoid falling prey to unlicensed companies by consulting their state's policies and other information regarding home warranty and similar services. In some cases current lists of licensed companies are available for consumers to check on the applicable state government agencies' websites.
In NSW(Australia), Home Owners Warranty must be taken out by your builder and a certificate of insurance must be provided to you if the value of work is over $20,000. by the contract, the company will send out a contractor from a local business. The homeowner will pay a pre-determined service call fee to the contractor, who will diagnose the problem with the failed system or appliance. The contractor will get approval from the home warranty company to make the repair, depending on if the diagnosis reveals that the failure was caused by something the contract covers. If the contractor receives approval from the home warranty company, they will complete the repair. As long as the repair or replacement doesn’t cost more than a limit stated in the contract, the home warranty will pay the contractor for the rest of the bill.
Home warranty companies deny systematic denial and claim that customers need to pay close attention to the contract. Warranty contracts specify that pre-existing conditions and problems arising due to lack of proper care and maintenance are not covered.
It is not too uncommon to find companies that open the business for a short period of time and then vanish. Around 20 companies went out of business between 2013 and 2014.