We all know that repairs are an inevitable part of living in a home, regardless if you own or rent one. Appliances break, faucets leak and HVAC units can stall in the middle of a heatwave. Rather than depleting their savings for these repairs, some people purchase home warranties to alleviate the upfront cost.
But, are home warranties worth it for both homeowners and renters? Learn more about what a home warranty is, when someone should purchase it and whether a home warranty is right for you.
What Is a Home Warranty?
Home warranties are renewable home service plans that provide discounted repair and replacement services for covered household appliances and systems. Contract terms vary, and coverage depends on the type of warranty you purchase. It does not provide the same coverage as homeowner’s insurance, so it’s important to know the difference between the two.
Homeowner’s insurance protects policyholders against damage to personal property and the home’s structure, such as fire damage or theft.
hen Is a Home Warranty Worth It?
A home warranty is worth it for homeowners who seek peace of mind regarding their home’s appliances and systems. Whether you are buying a home or are simply concerned about the lifespan of your appliances or systems, we’ve found that home warranties are a great way to protect your investments and wallet if a significant repair is needed.
According to a Forbes Home survey of 1,000 homeowners conducted in 2023, nearly 70% thought that their current home warranty coverage was worth the price. With over 23% agreeing that their policy saves them an average of $200 to $300 per repair.
When Is a Home Warranty Not Worth It?
If you’re thinking about buying a home warranty, it’s important to understand that there are times when this protection may not be worth the money. Some instances include:
- New appliances or systems: If your appliances and systems are relatively new and still covered by manufacturer warranties, the additional coverage from a home warranty might not add significant value.
- Routine maintenance: If you regularly maintain your appliances and systems, you could experience fewer issues, making the cost of a home warranty potentially outweigh its benefits.
- Annual premiums: High annual premiums and service call fees could also render a home warranty less cost-effective, especially if these expenses surpass potential savings from covered repairs.
- Coverage limitations: Home warranties may lack value if a home warranty’s coverage limitations or exclusions don’t align with your needs.
What Is Covered in a Home Warranty Policy?
Home warranties are a complement to home insurance. Depending on what level of coverage you purchase, we’ve found that home warranty plans will typically cover most major components of large home systems, such as your HVAC, water heaters, plumbing and electrical. Some plans cover appliances such as washers, dryers, refrigerators and electric stoves.
You can also purchase optional add-on coverage for your spa, second refrigerator, swimming pool, pumps, septic systems and more depending on how much you can pay for a home warranty.
How Does a Home Warranty Work?
Home warranties are offered via contract for a monthly or annual fee. In the contract terms, you get a fixed service call fee and annual coverage limits for repairs. Service fees and coverage limits vary depending on the company.
If a home system or appliance breaks down, you can file a home warranty claim online or contact your warranty’s customer service team. They connect you with an approved service provider to assess the problem and then perform the repair.
What Don’t Home Warranties Cover?
Home warranties will cover the cost of repairing many appliances and household systems; however, we’ve discovered that the extent of the coverage depends on the warranty company and what level of coverage you purchase.
However, some common items are generally excluded:
- Structural issues in foundations, walls, paint and flooring
- Commercial-grade equipment or systems
- Pre-existing conditions
- Normal wear and tear
- Rust, corrosion and sediment problems
- Improper maintenance, installation, design, manufacturer defect or previous repairs outside of the contract
- Detection and removal of asbestos, radon gas and mold
- Building and zoning code violations
Is a Home Warranty the Same as Home Insurance?
Whether you’re a first-time homeowner or just purchased your second or third home, there are many important things you should know like the difference between a home warranty and home insurance.A home warranty is a policy that covers the costs of service, repair or replacement of designated systems within your home if it fails unexpectedly due to a manufacturer’s defect, wear and tear or some other related issue.On the other hand, home insurance is a policy that financially protects you, your home and your personal belongings in the event of a catastrophe beyond your control, like a fire, a storm or an accident on your property that leads to bodily injury. Homeowner’s insurance is not required by law. Still, since you cannot obtain (or maintain) a mortgage without it, homeowner’s insurance is something nearly every homeowner should work into their budget.
How Much Does a Home Warranty Cost?
Buying a home is an exciting milestone, and you want to ensure everything is in good working order. That’s why it’s essential to get a home warranty. A home warranty is your insurance policy for unexpected repairs and maintenance costs when they come up.
We know that the cost of a home warranty can vary due to factors like the provider, location of the home and level of coverage you choose. For instance, a basic home warranty plan can range from $275 to $600 per year. However, more comprehensive plans with additional coverage for appliances, systems and optional add-ons could cost around $1,425 annually.
What Do Common Home Repairs and Replacements Cost?
Owning a home warranty plan can be a real money-saver for homeowners. Without a reliable home warranty plan, you could spend hundreds or thousands of dollars on unexpected repairs and replacements. For instance, basic HVAC repairs cost between $100 and $1,200 on average. The average refrigerator repair costs $250. And those are just the tip of the iceberg of what can go wrong in your home.
| Common Repairs | Cost |
|---|---|
| Leaky faucet | $90 – $350 |
| Roof repairs | $650 |
| Water heater repairs | $570 |
| HVAC issues | $150 – $450 |
| Electrical issues | $300 (for labor alone) |
| Septic issues | $1,500 |
| Dishwasher repairs | $150 |
How Much Is a Home Warranty Monthly?
When you purchase or rent a home, chances are you will be offered a home warranty as protection against costly unforeseen repairs. It sounds like a great idea, especially since our research pointed to an average monthly cost of between $25 and $50. Home warranties are typically a 12-month contract.
Do I Need a Home Warranty?
Unlike home insurance, a home warranty is not mandatory when moving into a new home. However, whether you’re purchasing a brand-new home or a previously owned one, it’s important to consider if it’ll be beneficial to get a home warranty in the long run. For instance, if your home inspection reveals several of the home’s appliances and systems are nearing their lifespan, a home warranty could help reduce any future repair or replacement charges.
Pros
- Peace of mind for those purchasing a home with used appliances and older systems
- Convenience. (There is no need to spend time researching dozens of repair technicians.) The home warranty company has a network of trusted professionals.
- No DIY skills or tools needed
- Relatively inexpensive to purchase. The average monthly fees are less than $100.
Cons
- Set coverage limits per repair or per year
- Service call fees. Every time an incident happens, you’ll have to pay a service call fee that may range from $50 to $75.
- Fine print. Claims can be denied if an item has not been properly maintained. The warranty provider may require you to show proof of maintenance.
- Less Control. Home warranty companies determine whether to fix or replace a system.
- You might never use it.
Should I Buy a Home Warranty?
A home warranty can be an excellent option to protect your home investment. When coupled with a good homeowner’s insurance policy, you can have most of your bases covered. However, if you purchased a new home, many house systems are covered by manufacturer warranties.
The same is true for new appliances. Before you take the plunge and buy a home warranty, make sure your systems aren’t already covered first.
How to Choose a Home Warranty
When owning a home, repairs and replacements of home appliances and systems are inevitable. Therefore, when shopping for a home warranty plan, it’s essential to consider how much coverage you’ll need, contact several reputable home warranty companies for quotes, read the fine print of your home warranty plan and plan for any add-ons you may want.
- Research companies and reviews: Look for reputable home warranty providers in your area. Read reviews, check customer feedback and research the company’s reputation and years of experience in the industry.
- Review coverage options: Different plans offer varying levels of coverage. Some plans may cover only specific appliances and systems, while others provide more comprehensive coverage. Ensure that the plan you choose aligns with your coverage preferences.
- Read the fine print: Carefully read the contract’s terms and conditions to understand what is covered and any excluded items. Be aware of coverage limitations, maximum payout amounts and any waiting periods before coverage begins.
- Consider add-ons: Some providers offer additional coverage options or add-ons for specific items not covered in the standard plan. Evaluate whether any add-ons align with your needs.
When to Skip a Home Warranty
Typically, when purchasing a newly built home, the likelihood you’ll need a home warranty is slim due to the countless warranties already provided. For instance, you’ll generally get a warranty from the builder for the home’s materials and workmanship, including plumbing, electrical, heating and cooling systems. Though the builder doesn’t usually cover appliances, they generally come with a manufacturer’s warranty of their own. Therefore, home warranties aren’t typically needed for up to 10 years after you move into your newly built home.
Home Warranty Alternatives
Home warranties can protect your home systems or appliances to ensure peace of mind as a homeowner. However, home warranties can come with limitations, exclusions or high deductibles. Luckily, home warranties are not the only options to ensure your home systems are always covered, and it is essential to consider other alternatives, such as:
Build an Emergency Fund
As a homeowner, having an emergency fund is always a bright idea, especially regarding your home systems. You can expect a costly bill if a home system needs repair or replacement. To ensure you are prepared for the financial hit to your monthly budget, creating an emergency savings fund by setting saving goals, sticking to a budget or opening a dedicated savings account will be crucial to cover any unexpected significant expenses.
Check if Your Appliances and Systems Already Have Their Own Warranties
Home warranties aren’t the only way to cover and protect your home systems. Typically, home appliances and systems are covered for repairs or replacement for a specific period of time by the manufacturer. Therefore, it is crucial that if any appliance or system fails, you check the documentation to review the warranty information and contact the manufacturer directly to ask if the appliance or system is still covered under warranty.
Get Systems Serviced Regularly
Regular maintenance on your home appliances and systems is the best way to ensure your home stays in working order. Therefore, a home warranty may not be necessary. Not only does preventative maintenance help to identify issues before they become major, costly problems, but it also extends the lifespan of the systems.
