Coverage cap

"The maximum dollar amount a home warranty contract will pay toward repair or replacement of a covered system or appliance, either per claim or per contract year."

Why it matters

The coverage cap is the most under-read line in a home warranty contract. A $1,500 cap on HVAC sounds reasonable until your 12-year-old compressor fails and the replacement quote comes in at $4,200. The cap is what determines whether the warranty actually saves you money on a major failure, or whether it just absorbs the easy claims.

Caps vary wildly: some carriers cap HVAC at $1,500 per occurrence, others at $5,000. Some use aggregate annual caps across all claims; others use per-system caps. The contract is the only authoritative source.

Best practices

Compare caps not premiums when shopping. A $50/month plan with a $5,000 HVAC cap may be a better buy than a $40/month plan with a $1,500 cap if you have an aging system. Ask the carrier for the contract document, not just the brochure, before signing.

Frequently asked

Does the cap reset every year?

Per-claim caps reset every claim. Aggregate annual caps reset on the contract anniversary date. Some carriers use both: a per-claim cap and a separate annual aggregate. Read the limits-of-liability section.