Before you shop for a service contract, decide which loss you are worried about. Some losses fall under a home policy, some fall under a contract, and some fall under neither. Sorting them first tells you what you are actually buying.
Name the loss in writing
Write down the worst realistic event for each system you care about. A heating unit fails in cold weather. A water heater leaks through the floor. A repair bill arrives with no warning. Name the cost you want to avoid and the time you would lose without the unit working.
Read the policy sections that matter
Find the coverage section and the exclusions in your home or renters policy. Look for language on sudden damage, wear and tear, mechanical breakdown, and maintenance. Policies commonly pay for sudden damage from a listed cause and often exclude gradual wear. A breakdown from age may therefore fall outside the policy. Read your own form, because forms differ.
Ask the agent in writing
Ask your agent whether the loss you named would be paid under your policy, and ask for the answer in writing. Ask which form and endorsement govern the answer. Do not assume coverage from a general sense that the home is insured.
Decide what a contract would add
If the policy does not cover the loss and the loss would hurt your household, a contract may fill that gap. If the policy already covers it, a contract may duplicate it. Compare the two against the list you wrote. The contract's own terms, not this article, decide what it pays.
Check the state rules
Each state page on this site names the statute or program that governs service contracts in that state, prints the roster where the state publishes one, and says which states this edition has not read. Read your state page and the statute it cites. This article is general information. It is not legal or insurance advice, and it does not say what any policy or contract covers.