How Much Does a Home Warranty Cost?
Replacing a broken appliance or fixing a major plumbing issue can be expensive. Purchasing a home warranty can be a smart investment, but how much does a homeowner warranty cost? On average, a standard plan is around $600 per year or approximately $50 per month.
In this article, we’ll break down the typical costs of a home warranty, what exactly you’re paying for, and how to save money when choosing a plan.
Want to give your home protection with a minimum budget? Let’s pe in.
What Should You Know About Home Warranty?
A home warranty is a service contract that covers the repair or replacement of important home systems and appliances that break down over time. Unlike home insurance, which covers damage from unexpected events like fires, floods, or theft, a home warranty specifically covers wear and tear issues.
What is a Home Warranty?
A home warranty is a service contract that covers the repair or replacement of important home systems and appliances that break down over time. Unlike home insurance, which covers damage from unexpected events like fires, floods, or theft, a home warranty specifically covers wear and tear issues.
How Does a Home Warranty Work?
When a covered item breaks down, you contact your home warranty provider. They will appoint a technician to see what’s wrong. If the problem is covered under your warranty, the provider will cover the cost of the repair or replacement, minus any service fee you need to pay. This fee is usually a small, fixed amount and is specified in your contract.
Let’s see how it works:
How is a Home Warranty Different from Home Insurance?
While both protect homeowners, home warranties and home insurance serve different purposes:
| Home Warranty | Home Insurance | |
|---|---|---|
| Covers | Systems and appliances inside your home | The structure of your home and your personal property |
| Protects against | Normal wear and tear, mechanical breakdowns | Disasters like fire, wind damage, theft, liability |
| Cost structure | Yearly fee (typically $600 to $800, so, home warranty cost per month is $50 to $70) plus service fees ($75 to $125 per call) | Yearly premium (varies widely) plus deductible for claims |
| Claim process | Call the warranty company, and they send a technician | File a claim, insurance adjuster assesses the damage |
| Is it optional? | Yes, but often recommended for older homes | Usually required by mortgage lenders |
| Contract term | Usually one year, renewable annually | Typically one year, automatically renewed |
| Customization | Can often add or remove specific items from coverage | Can adjust the amount of coverage and add additional risks for certain items |
Pros and Cons of a Home Warranty
- Peace of mind: Knowing a warranty covers repairs for major appliances and systems can be a big stress reliever, especially for unexpected breakdowns.
- Budget predictability: Home warranty plans offer fixed yearly costs, so you won’t be surprised by sudden repair bills.
- Discounted repairs: Even with a service call fee, warranty repairs are often cheaper than paying an independent contractor, especially for complex issues.
- Convenience: The warranty company handles finding qualified technicians to diagnose and fix the problem, saving you time and hassle.
- Increased home value (potential): A home warranty can be an attractive selling point for potential buyers, especially if your appliances and systems are older. In this case, the home warranty cost to the seller will more than pay for itself.
- Potential for denials: Be aware that warranty companies may deny coverage for pre-existing conditions, lack of maintenance, or issues outside the plan’s limits.
- Limited choice of repair technicians: You won’t be able to choose the technician who fixes your appliance or system, though the warranty company should send qualified professionals.
- Out-of-pocket costs: You’ll still have to pay a service call fee for each repair request, even if the warranty covers the repair itself.
- Not a replacement for major repairs: Home warranties typically have coverage limits per appliance or system. For very expensive repairs, you might still be on the hook for some of the cost.
- May not be worthwhile for new appliances: If your appliances are all relatively new and under the manufacturer’s warranty, you might not need the extra coverage.
What Is Typically Covered and Not Covered by a Home Warranty?
While home warranty plans can vary, most include similar coverage for home systems and appliances. Here’s a detailed look at what you can generally expect.
What Is Typically Covered
Home warranties usually cover major home systems and appliances. Here are the common categories:
Home Systems:
Home Appliances:
What Is Not Typically Covered
While home warranties cover many essential systems and appliances, they do not cover everything. Here are the items and issues generally not covered:
Factors That Affect Home Warranty Pricing
The cost of a home warranty can vary widely based on several factors. Let’s look at them closer.
Provider and Selected Plan
Add-On Coverage
If you opt for add-on coverage for items like pools, spas, septic systems, or second refrigerators, the cost will increase. Each add-on comes with an additional fee and costs $40 – $180 per year. Common add-ons include pool/spa, septic system, well pump, or roof leak coverage.
Payment Frequency
Service Call Fee
You pay this fee every time you call for a technician. A lower service call fee usually means a higher annual premium, while a higher service call fee can lower your annual cost.
Home Size
Larger homes may require more extensive coverage, thus increasing the price.
Location
The average cost of a home warranty varies depending on where you live. Some regions have higher labor and parts costs, which can raise the price of coverage.
Home Age
Older homes with aging systems and appliances may cost more to cover due to the higher likelihood of breakdowns.
Customization Options
Promotions and Discounts
Things to Consider Before Getting a Warranty for Your Home
Before you jump on the first home warranty plan you find, here are some key points to consider:
Do your research
Not all home warranty companies are created equal. Read reviews, compare plans, and get quotes from multiple providers to find the best coverage and value for your needs.
Understand the fine print
Carefully read the warranty contract to understand exactly what's covered, what exclusions exist, and the process for making a claim.
Consider your budget
Factor in the annual premium, deductible costs, and any potential service call fees to see if a warranty fits your budget.
Evaluate your risk tolerance
If you're comfortable handling minor repairs yourself or have an emergency fund for unexpected breakdowns, a warranty might not be necessary.
Think about your home's age and condition
Older homes with aging appliances and systems are more likely to need repairs, making a warranty more appealing.
Review your existing homeowner's insurance
Remember, a typical home warranty covers breakdowns due to wear and tear, while homeowner's insurance protects your home itself from covered events.
Do you have any home maintenance skills?
If you're handy and comfortable fixing minor issues yourself, you might save money by skipping the warranty.
Tips to Choose a Home Warranty Company for Your Needs
When looking for a home warranty, it’s important to choose wisely. Here are some tips to help you:
How to Reduce a Home Protection Plan Cost
Even if you’ve decided a home warranty is a good fit, there are still ways to save money when choosing a plan:
Conclusion
A home warranty can be a great solution to manage the repair cost in your home. While a warranty can provide peace of mind and potentially save money on repairs, it’s crucial to think about your needs and budget.
Always compare several options, analyze your potential maintenance costs, and strive to get the best plan for your needs. At the same time, regular maintenance and careful budgeting can also play a big role in keeping your home running smoothly and avoiding unexpected expenses.
Frequently Asked Questions
- A home warranty can be a good option if you want peace of mind about unexpected appliance and system repairs. It can help you budget for these costs and avoid the sting of a large repair bill. However, it’s not for everyone. Consider your budget, the age of your home’s systems, and your comfort level with repairs before deciding.
- Home warranty covers breakdowns due to wear and tear on your appliances and systems. Home insurance protects your home itself from covered events like fire, theft, or weather damage. They work together to offer complete protection for your home.
- Home warranty agreements are typically for one year. You’ll renew the plan annually if you want to continue coverage.
Home warranty plans can be a good choice, but it depends on your needs. If you have older appliances or systems that are likely to need repairs, a warranty can provide valuable protection. However, if your home’s systems are newer or you’re handy and comfortable fixing minor issues yourself, you might save money by skipping the warranty.
