If buying a home, even though the home may receive a satisfactory inspection, future problems may arise which can be costly to repair. To protect themselves from the high cost of a home repair, many homeowners purchase a home protection insurance plan. Also known as a home warranty plan, this insurance plan can reduce stress and provide peace of mind when buying a new home. Home systems and appliances are not guaranteed to always function. Although the manufacturer may offer a warranty, this is usually a limited plan, and will not cover damages that occur once the warranty period concludes. With a home protection plan, homeowners can renew the insurance annually. Thus, the home's systems and appliances can continually be covered.

First time homebuyers may confuse a home protection plan with homeowner's insurance.

Home insurance is required by all mortgage lenders. On the other hand, a homeowner's protection plan is an optional service. Owning a home means paying additional expenses. Unlike renters, who can simply call a landlord to fix a leaky faucet or broken water heater, homeowners must pay for these expenses out-of-pocket. Naturally, it is difficult to build a cash reserve for home repairs. With a home protection insurance plan, repairs and replacement cost of certain appliances are covered by the plan.

Homeowners may choose coverage based on their individuals needs. A home protection plan offers a basic coverage of plumbing systems, water heater, electrical systems, ceiling fans, dishwasher, built-in microwaves, refrigerator, garbage disposal, and trash compactor. Unfortunately, there are certain limitations to the coverage of appliances. For example, the protection plan may cover the repair and replacement costs with the plumbing system. Yet, problems with the bathtub or shower may not be covered. Homeowners should carefully review their home protection plan for a general idea of covered items and exclusions.

Homebuyers do have the option of obtaining additional coverage. For example, the bonus coverage may cover the repair and replacement cost of the air conditioning unit and heating system. Furthermore, homeowners may purchase a washer/dryer package, or optional coverage for outdoor pools and spas.

The annual price for a home protection plan will depend on the home, the area, and the issuer of the coverage. Basic plans can run from $300 - $500. Additional coverage may cost an extra $60 - $200 per year. For each service call, homeowners may pay a designated fee.