Things break. But when you have money wrapped up in your refrigerator, furnace or other appliances, it could get quite expensive to fix or replace them, especially right after you bought a house.

To help,  people often turn to a home warranty, also known as a home service contract. That contract provides service, repair or replacement on a home’s major systems and appliances for a year, though some companies offer monthly or other terms.

It’s like property insurance except insurance is for things that might happen. A home warranty covers things that do happen such as the water heater busting or your stove not heating.

“If you are buying or selling a house, the last thing you want to deal with a week after you move in is the air conditioner breaking,” says Art Chartrand, chief executive and counsel of the National Home Service Contract Association (NCSCA).

“Right now, many sellers are providing a one-year home warranty. People need a good maintenance program so if something breaks it won’t break their bank account.”

Popularity of home warranties increasing

The purchase of these service contracts has grown tremendously over recent years. According to the NCSCA, members sold more than 4 million home warranties in 2015. That’s an eight percent increase from the year before.

The association is a non-profit comprised of member companies serving home service contract providers and consumer interests. It was created in 2004 and conducts research and promotes education, publications and other methods that improve consumers’ understanding of home service contracts.

What do home warranties cover?

Home warranties usually cover major appliances and systems such as: central air conditioning and home heating; interior electrical system; humidifier; refrigerator; oven, cooktop and range; dishwasher; built-in microwave; water heater; garbage disposer; garage door opener; and plumbing system.

But each plan is different, and the coverage is based on the conditions and terms you select and the other items you want to cover.

In addition to protecting consumers on the wear and tear of their home’s core appliances and systems, many home service contract providers also offer optional coverage on a swimming pool or spa equipment, as well as other free-standing appliances such as washers and dryers for an additional fee.

Also, if smaller things such as the ice maker in your refrigerator are important to you and your home warranty company doesn’t cover it in the regular plan, you can ask them to add it. Some plans also include light fixtures and others don’t. Not all contracts are treated equally, Chartrand says.

If you live in a rural area where septic systems and water pumps are used, you have to keep in mind that many service contracts have limitations of what they will cover. Some have a dollar amount limit. If you need a higher limit because putting in a new water pump could be quite expensive, you can find one of the major home warranty companies that might be able to help you.

“There are new home service companies coming along all the time. If a consumer wants confidence in which they are choosing, we register and list them on our website,” Chartrand says.

He adds that the NCSCA visits the offices of each of the warranty companies, and the owners agree to a code of ethics.  If a customer has a complaint about one of the association’s members, they can file it on the website and that complaint goes straight to the warranty company’s CEO.

Who buy home warranties?

Chartrand says that more than two-thirds of all home service contracts are sold when someone buys a house, and many times the sellers pay for the warranty.

The other third are sold to people already in their houses and want to protect themselves financially. Some people renew their warranties every year. Some are offered on monthly terms.

How much is a home warranty?

“The cost can vary a lot. But the average contract for a whole home is $550. Some geographic locations are more and some are less,” he says. “But make sure you read your coverage, and that the contract will keep you up and running if something breaks.”

The contract allows the homeowner to call the warranty company when something isn’t working, and that company then initiates the claim. They call the plumber, electrician or appliance maintenance person to your home.

“It’s so much better than you calling the plumber on your own. And if the warranty company sends someone that you don’t think knows what they are doing or you just didn’t like the guy they sent, you can request a second opinion,” Chartrand says.

What happens when you need help?

Don’t expect a service technician to come to your home if you have a broken knob on your stove or you put some scratches on the front of your stainless steel refrigerator.

The warranty is there to keep the appliances and systems functioning. Some people think because they have a warranty that they’ll get a brand-new dishwasher if isn’t working.

But first, the service companies send someone to investigate the problem and try to repair it first. Homeowners might even have to wait awhile until a part comes in. Home warranties are not an emergency service business.

If the air conditioner stops working, they can’t magically make things work just because you called them, Chartrand says. Within 3-5 days of you calling, the warranty company will try to get your appliance in working order.

If it is affecting the safety of those in your home – such as its freezing outside and the furnace goes out – Chartrand says the industry will expedite your claims.

The service companies will repair the appliance if they can. But if the homeowners are neglectful – such as not changing the furnace’s air filters for two years – then they most likely won’t be getting a new furnace when it breaks down.

“You need to maintain your home and know the basics,” he says.