A home warranty is a service contract that covers the repair or replacement of household systems and appliances. After purchasing a plan, homeowners protect themselves from unexpected repair costs. When an appliance breaks down due to normal wear and tear, the warranty company sends a contractor to fix or replace it for a service fee. Different companies offer different plans; it's important to carefully review the plan to understand coverage, exclusions, and costs, as home warranties are not the same as homeowners insurance.