Shopping for a home warranty? Cross these 8 items off your list first

Kendel Bryant's air conditioning stopped blowing at the worst possible time: It was the Fourth of July, steaming hot and she had a full house — her fiancé, parents and godson were all guests in her home for the holiday weekend.

As her A/C unit leaked coolant, her family stationed fans around the house and slept downstairs, hoping for some kind of cool reprieve. There was none. "It was so frustrating," she says.

The next day, she called the home warranty company she paid $1,050 three months earlier to repair most of her household appliances should any stop working. By midday, the company sent out one of its subcontractors to fix her A/C, for a $45 co-pay.

Home warranties — service contracts in which companies repair or replace broken-down appliances, and heating, air and plumbing systems — can be a boon to homeowners hoping to avoid exorbitant repair costs on major home appliances, components or systems.

But there are some drawbacks: The policies don't cover every component of your house and require cash money upfront, even if you never have cause to use it.

If you're considering a home warranty, check these items off your list before you buy so you get the most out of it.

Item 1: Review your policy like a hawk

Just like a warranty on a new TV or car, home warranties cover certain components of your home for a certain length of time depending on the particular plan you purchase.

So don't assume your policy covers every single appliance and system in your home — because it doesn't. Pore over your plan carefully so you don't think something's covered when it's not.

A warranty may cover plumbing, water and electrical systems, whirlpool bathtub, oven, dishwasher, garbage disposal, garage door opener and ceiling fans. But that doesn't mean it covers your dryer if the dials fall out or it makes strange noises.

Item 2: Don't treat it like insurance

Because it's not.

If, heaven forbid, some of your appliances or systems get scrapped in a fire or flood — or get snagged by a thief — don't expect a check in the mail to recoup your losses, says the National Home Service Contract Association.

Warranties don't operate like insurance policies. And most of them don't cover items that are worn out from improper use, were improperly installed or had preexisting problems, such as a manufacturer's defect.

Item 3: Prepare to pay a premium

These policies aren't cheap. On average, basic plans range from $350 to $500 and get pricier for expanded levels of coverage.

You'll have to purchase a policy from a home warranty company, and you'll have to pay that company upfront.

Item 4: Check the licensing

Speaking of home warranty companies, check with your state's department of insurance to ensure the one getting your business is properly licensed.

Do some legwork: Consumer Affairs and the Better Business Bureau both provide reviews and ratings of leading home warranty companies, while Angie's List, the crowdsourced consumer review website, has written extensively on the topic.

Item 5: Get comfortable with contractors

Let's say your water heater goes on the fritz. What do you do? You pick up the phone and call your home warranty company. And what will they do?

They'll send a subcontractor to your house.

That's right: Home warranty companies rely on vendors with whom they've contracted to do the work, meaning homeowners have no say in who shows up to perform their repairs.

Item 6: Keep budgeting because you'll still spend money

Yes, a home warranty helps avoid repair costs but it doesn't mean you'll never shell out cash again. Policyholders have to pay a service fee.

Item 7: Weigh the risks and benefits

Is paying for a warranty to fix your dishwasher each time it breaks worth the hassle when a new one might be cheaper in the long run?

It's a question Bryant faced after discovering her warranty won't pay for a new air conditioning coil — the source of the leaks — because it contains rust. She decided a $45 co-pay wasn't worth the hassle if all she could get was a patch job, and canceled her home warranty.

Item 8: Keep your eye on the prize

Purchasing a home warranty to package with the sale of your home could make your house more attractive to buyers. In 2014, the Service Contract Industry Council, a trade association, released a study showing that houses with home warranties, on average, sell 11 days sooner and for $2,300 more than homes without them.

The warranty alleviates worry for buyers who may not have enough cash to immediately start building a home repair fund so soon after buying the house.

Parting words

We all enjoy peace of mind, and there's no doubt a home warranty can offer it. But do your due diligence and know exactly what you're getting yourself into, and if paying for a policy makes sense for your budget.