A home warranty contract is insurance that protects the working appliances and systems in the home. It provides protection through repairs or replacement of a home's major systems should an item break down due to normal wear and tear, regardless of that item's age. A warranty provides assurance that homeowners won't be shocked with large or expensive bills to repair or replace protected items.

Home warranties can be purchased for all types of homes-condominiums, townhomes, manufactured and mobile homes, duplexes, triplexes and fourplexes.

Statistics show that covered homeowners will use their warranty about 1 to 1.5 times a year. And, according to research conducted and provided by The National Home Warranty Association, eight out of 10 people prefer having a home warranty.

Contracts are usually for one year, and homeowners may pay the fee annually, quarterly or monthly, plus a flat fee of $35-$50 for any repair or total replacement that can't be repaired. Some plans require an inspection before coverage, others do not. Plans offer basic coverage for certain items, and will cover other items for extra premiums. Some items are always excluded. Prices and coverages vary so it is important to study the contract and see exactly what is covered and excluded in each contract.

Home warranty contracts also appeal to home sellers cause they can help the home sell faster by providing a competitive edge over other homes on the market. Homes with warranties often sell for a higher price because when the buyer has confidence in a home it discourages downward price bargaining. Home warranty contracts also offer the seller after-sale liability protection because after the seller has moved out, the buyer will call the warranty program, not the seller, if the house develops a mechanical or systems problem.