Home Warranty in California: What It Covers, Who Pays and How It Differs From Insurance

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

In California, a home warranty is legally a "home protection contract": a one-year (or longer) service contract under which a licensed company repairs or replaces covered home systems and appliances that fail from wear, deterioration or defects. Home warranty companies are licensed by the California Department of Insurance, but a warranty is not homeowners insurance and does not replace it. Who pays is negotiated in the purchase agreement; sellers often buy one for the buyer, and buyers can also buy their own.

What California law calls a home warranty

The Insurance Code defines a home protection contract as an agreement, for a set term and a fee, under which someone other than the builder, seller or lessor of the home agrees to repair or replace components, systems or appliances that fail from wear and tear, deterioration or inherent defect, and provides a service system for those repairs. It does not cover consequential damage caused by the failure (Insurance Code 12740). The fee covers one year; longer terms add a prorated amount.

The rules sit in Part 7 of Division 2 of the Insurance Code (sections 12740 to 12764). Key points:

• License required. Anyone issuing or offering home protection contracts in California needs a home protection company license from the Department of Insurance, unless it is an insurer admitted for that class of business (Insurance Code 12744).
• Its own set of rules. Home protection companies are regulated mainly by Part 7, plus the parts of the code it pulls in (Insurance Code 12742 and 12743).
• Forms on file. A company can’t issue a contract until its form is filed with the Insurance Commissioner (Insurance Code 12763).
• What’s not a home protection contract. A builder’s or appliance manufacturer’s guarantee, a repair warranty from the company that sold or serviced the item, and a pest control service agreement are outside Part 7 (Insurance Code 12741).

What the contract must tell you

The contract must state in clear and conspicuous terms (Insurance Code 12762):

• The appliances, systems and components covered.
• All exclusions and limits on coverage.
• The term, the contract fee and any renewal terms.
• The services provided, any service fees, and any limits on when or where service is available.
• That service is requested by phone without first filling out a claim form.
• That service will begin within 48 hours of a qualifying request.

The Commissioner can’t dictate which appliances or systems must be covered, except to keep exclusions fair or to stop coverage from being illusory. That’s why plans differ so much from company to company.

What home warranties typically cover and exclude

The Department of Insurance describes typical coverage in general terms (CDI, Home Protection Contracts). Treat this as a general picture; your contract controls.

• Often included: major appliances such as washers, dryers, ovens and refrigerators, along with home systems the plan lists.
• Often extra-cost or plan-dependent: air conditioning, garbage disposals, doorbells, ceiling fans, garage door openers, water softeners, trash compactors and built-in microwaves.
• Always present: exclusions, conditions and dollar limits. CDI notes many buyers learn about them only when a claim is denied.

Generally (check your contract), items to read closely include: pre-existing conditions and how the plan defines them, code upgrades and permit costs, access costs (opening walls or floors), per-item and per-contract caps, the service fee charged per visit, and items such as pools, spas, wells, septic systems and second refrigerators that are often optional add-ons. Rural North Bay buyers with wells or septic systems in Sonoma, Napa or Marin counties should confirm in writing whether those systems are covered at all.

Home warranty vs. homeowners insurance vs. home inspection

The three are often confused. They do different jobs.

Put simply: the inspection tells you what condition the home is in now; the warranty may pay to fix covered items that break later; insurance covers sudden losses such as fire. A water heater that wears out may be a warranty claim. The water damage it causes is not a warranty item and may be an insurance question. Set up insurance during escrow; see homeowners insurance during escrow and, if needed, the California FAIR Plan.

A warranty also isn’t a substitute for an inspection. Get the inspection first; see our home inspection guide. Defects the inspection finds belong in a request for repair, not in a hope that the warranty will pay.

Who pays in a California sale

There’s no legal rule on who pays. CDI notes warranties are often included in a home purchase and paid for by the seller or agent, and that you can choose your own company. In practice:

• Negotiated in the offer. The purchase agreement can say whether the seller will pay for a plan, up to what cost, and who picks the company. See our California Residential Purchase Agreement guide and who pays closing costs.
• Paid through escrow. A contract that starts coverage before the buyer’s purchase closes needs consideration, which can be a good-faith promise to pay the fee when title transfers (Insurance Code 12761). That’s why the fee usually shows up on the closing statement.
• Can’t be free or forced. Giving a home protection contract free is prohibited (12761). No home protection company or insurer may make buying one a condition of getting other insurance tied to the transaction, and a home protection company may not pay commissions to induce its sale, with a narrow exception for its own marketing staff who aren’t real estate licensees in the deal (Insurance Code 12760).
• As a negotiating tool. A seller-paid warranty is a modest concession. When larger repairs are at stake, a price reduction or credit is usually more useful; see seller concessions.

Some plans also offer coverage to the seller while the home is listed; that option depends on the company and is limited by statute (Insurance Code 12761.1).

Before you sign up

1. Check the license. Use CDI’s license lookup or its list of licensed home protection companies, which includes complaint information, linked from CDI’s Home Protection Contracts page. CDI has acted against companies selling without a license and against misleading "final notice" mailers (CDI press release, 2023).
2. Match coverage to the house. Don’t pay for pool or AC coverage you don’t need; add coverage for systems you do have.
3. Read exclusions and caps. Look for per-item limits, pre-existing condition language and service fees.
4. Keep records. Save the inspection report and maintenance records; they help if a claim is disputed.
5. Know where to turn. If a claim is denied and the company’s appeal fails, CDI accepts requests for assistance by phone, chat or online.

Questions people ask

Is a home warranty the same as homeowners insurance in California?

No. The Department of Insurance licenses home warranty companies, but it states a warranty is not homeowners insurance and does not replace it. Your lender will still require insurance.

Who regulates home warranty companies in California?

The California Department of Insurance. Companies need a home protection company license under Insurance Code 12744, and their contract forms must be filed with the Commissioner.

How fast must a home warranty company respond?

The contract must disclose that service begins within 48 hours of a qualifying request, and that requests can be made by phone without first filing a claim form (Insurance Code 12762).

Does a home warranty cover pre-existing problems?

It depends on the contract. CDI says coverage generally applies to wear, deterioration or defects, including some existing when you bought the home, but every plan has exclusions and limits. Read the pre-existing condition clause.

Should the seller pay for my home warranty?

It’s negotiable. Sellers often offer one, and you can ask for it in your offer. For bigger issues found in inspection, a credit or price reduction usually does more.

Can my agent require me to buy a specific warranty?

Whether to include a warranty, and which one, is negotiable in your purchase contract. CDI notes you can choose your own warranty company, and Insurance Code 12760 bars warranty companies from paying commissions to induce a sale or tying the contract to other insurance.

Does a home warranty replace a home inspection?

No. The inspection tells you the condition before you commit; the warranty only addresses covered failures later, under its terms and caps.

Sources & notes

1. California Insurance Code 12740 (definitions)
2. Insurance Code 12741 (exclusions from Part 7)
3. Insurance Code 12742 and 12743 (governing law)
4. Insurance Code 12744 (license)
5. Insurance Code 12760 (commissions, tie-ins), 12761, 12761.1
6. Insurance Code 12762 (required disclosures) and 12763 (form filing)
7. Business and Professions Code 7195 (home inspection)
8. California Department of Insurance, Home Protection Contracts
9. California Department of Insurance press release 022-2023

Statute text was read on a public mirror of the official code; links go to leginfo.legislature.ca.gov. No plan prices are given because they vary by company, plan and property. Coverage examples are general, from CDI; the contract you sign controls.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

Related: Home inspection in California · Final walkthrough checklist · Buy with Diamond · Contact us