Home Warranty Cost Guide
A home warranty can help you financially when home appliances and systems stop working. It’s not an insurance policy, but it protects items in your home from normal wear and tear. No one likes it when an appliance or system stops working; a home warranty can help.
Before buying a home warranty, though, it’s essential to understand the home warranty cost. So here’s everything you must know.
What is a Home Warranty?
A home warranty provides financial protection for your home’s appliances and systems. It covers some of the cost of repairing your appliances or systems if they break down from normal wear and tear.
A home warranty isn’t insurance. It doesn’t protect your appliances and systems from major issues like tornadoes, flooding, or fire. Instead, they cover appliances or systems when they break down after regular use and proper maintenance.
For example, if you maintain your HVAC system annually and use it as directed by the manufacturer and it stops working, your home warranty may cover some of the cost to repair it.
How Home Warranties Work
Each home warranty company offers different coverage options, but most coverages work the same.
You pay a premium annually for the coverage, and the company covers the named appliances and systems under the terms and conditions they’ve supplied.
Each warranty company has different requirements, including how to maintain and/or use the items. They may also limit the reasons they’ll cover a repair. For example, if they determine you didn’t maintain your dishwasher as required, and the repair could have been prevented, they may deny the claim.
Of course, this isn’t the point of home warranties, but you should read the fine print to know what is and isn’t covered.
In addition, consider which appliances and systems the warranty will cover. For example, don’t assume they’ll cover every appliance, especially if you have several of the same type of appliance in your home.
If you have a valid claim, you file it with the warranty company according to their procedures, either online or over the phone, and wait for a repair company to visit your home.
Warranty companies work with local repair companies to handle your appliance and system repairs. The warranty company oversees who comes to your home and schedules the appointment. You’re on the warranty company’s timeline, so be sure you know how they operate.
What’s Typically Covered on a Home Warranty?
Knowing what’s typically covered by a home warranty is important. However, as we said, every company is different, so be sure to ask specific questions.
In general, here’s what’s covered:
- Air conditioners
- Built-in microwaves
- Ovens and stoves
- Garage door openers
- Garbage disposals
- Electrical systems
- Plumbing systems
Each home warranty policy covers different appliances and systems. In addition, each has different exclusions, not to mention it depends on the type of coverage you purchase. For example, you could purchase a warranty for appliances or home systems. However, you may also purchase a policy that covers both.
A Breakdown of the Home Warranty Cost
The home warranty cost is an essential factor when considering a home warranty. You’ll pay a premium no matter where you buy your policy, but you’ll also be on the hook for service fees and potential add-ons.
When deciding which home warranty to purchase, consider how you’ll pay the premiums. Most companies require you to pay home warranty premiums annually (once a year). However, you may request a monthly premium if you need to break up the cost. Most companies charge a small convenience fee for this option, increasing your cost slightly.
The cost you pay to buy the warranty protection is the premium. The average policy costs $350 to $600 but can vary considerably.
The cost depends on what you cover, such as home appliances, systems, or both. For example, if you cover only home appliances, the policy may cost less than if you cover appliances and systems.
You pay the premium to purchase the policy, no matter if you use it. For example, say you pay $600 for a home warranty, and nothing breaks down in that year. You don’t get the $600 back – it’s the cost of covering your home.
Again, if you can’t afford the premium in one lump sum, you may request to break it up into monthly payments. Talk to the home warranty companies you’re considering to see if that’s an option.
Service fees are the costs you pay when you need a repair. For example, if your refrigerator stops working, you’d pay a service fee for the repair person to assess the issue.
Every home warranty company differs, but expect to pay $50 to $150 for each service call. Understand the fine print to determine what the company charges and if different repairs have different service fees.
Also, pay attention to the company’s limits or caps. For example, if they have a cap of $5,000 annually and your repairs exceed that amount, you’ll be on the hook for the service fee plus any excess costs above the $5,000 limit.
Like insurance, home warranties have add-ons. Each add-on has its own cost, terms, and conditions. Depending on the coverage, the add-ons can be a few dollars to $40 each.
For example, common add-ons include coverage for a swimming pool, hot tub, roof leaks, or septic tank coverage.
How Long Does a Home Warranty Last?
Most home warranties last for one year, so the premium you pay is for 12 months starting the date you purchase it. However, keep in mind that each policy has a waiting period. So although you purchased coverage for 12 months, it might only be effective for 11, depending on the waiting period.
Most warranty companies allow you to renew coverage, and some may offer the option to prepay for a few years at a time. It varies by company.
Determining if a Home Warranty Cost is Worth It
So how do you determine if the home warranty cost is worth it?
It requires estimating what you expect to repair, but here’s how it works.
Take the total premium cost and estimate the number of claims you might have. Of course, you know your house best and the condition of your appliances and systems. If you aren’t sure what to expect, use an estimate of a couple of claims per year.
Multiply the number of claims you expect by the service fee. So, for example, if you expect 5 claims and the service fee is $100, that’s $500 plus the premium, which, let’s say, was $650.
In total, you’d pay $1,150 for the year for the warranty coverage. Now compare that cost to the average cost of the expected repairs in your area to see if you’d save money.
As a couple of examples, here are some average costs:
- Refrigerator repairs – $200 – $1,000
- HVAC repairs – $100 – $600, plus hourly rates of $50 to $100 per hour
Comparing what you expect to what it might cost can give you a good idea if the warranty is worth it.
Reasons to Consider a Home Warranty
Knowing the home warranty cost, you might wonder what reasons there are to consider a home warranty.
Here’s what to consider.
1. Protect Expensive Appliances
If you have high-end appliances in your home, a home warranty can make it much less expensive to repair them. The higher-end your appliances are, the more they will cost to repair. Having financial protection against the cost can be beneficial.
2. You Aren’t Sure About the Home’s Condition
If you’re buying an existing home, you may wonder if the owner was honest about the condition and age of the appliances and home systems. Buying a home warranty may save you from experiencing unpleasant surprises should they break down within the first year you live there.
3. Home System Repairs can be Expensive
You could save thousands of dollars if you purchase a home warranty to cover your home systems. HVAC, central vacuum, plumbing, and electrical systems can have serious (and expensive) issues that a home warranty may help reduce.
4. Time Savings
Having a home warranty can save you the time and hassle of finding contractors to repair your appliances or home systems. Knowing you only have to file a claim and the rest is handled for you can be reassuring.
Does a home warranty cover accidental damage?
Home warranties usually only cover damage from normal use or wear/tear. They don’t cover accidental damage. Only homeowner’s insurance covers accidental damage like fire, weather, or vandalism.
What is a warranty fee?
The warranty fee is the cost of purchasing the warranty or financial protection of your appliances or home systems. Another word for the fee is premium; you’ll pay it annually for coverage.
Is a home warranty a write-off?
A home warranty isn’t a typical tax write-off. However, if you operate a business in your home, you may be able to deduct a portion of the warranty’s cost.
Understanding a home warranty cost is important because you’ll pay a premium to purchase it, plus the service fees for every service call. Finding the most affordable plan can help you get the coverage and prices you can afford.