How Much Does a Home Warranty Cost?
Getting a home warranty can help homeowners avoid a huge repair bill. The cost of a home warranty typically falls between $264 and $1,425 annually, with the national average at $600.
- A home warranty will typically cost a homeowner between $264 to $1,425 per year, with a national average cost of $600.
- The three main factors that affect the cost of a home warranty are the premium, the service fee, and any add-ons the homeowner chooses.
- A home warranty may be a good idea for homeowners whose appliances and home systems are aging, who have a limited budget, who are inexperienced with DIY repairs, or for those who are in the process of buying or selling a home.
As with an appliance or car warranty, a home warranty protects a homeowner’s investment against system failures. For many home buyers, especially those purchasing older homes, a home warranty can reduce the financial risk in the vulnerable period immediately after the sale, before the homeowner has had time to build up an emergency fund. But this only helps if the home buyer ultimately spends less on the warranty than they would on costs for emergency home repairs, or if the home warranty cost doesn’t prevent them from building their emergency fund.
The total cost will vary by home warranty company and is directly affected by what’s covered in the base plan, what add-ons are selected, and the service charges for service visits and claims. For most homeowners, the home warranty cost per year is between $264 and $1,425, with the national average cost of a home warranty at $600. It’s critical for a homeowner to read the fine print and understand what is and is not covered, as well as if there are any ways they can inadvertently void the warranty.
What Is a Home Warranty?
It’s common to hear about home warranties while in the process of buying or selling a home. But what is a home warranty, exactly, and is it really needed? A home warranty is a service contract that covers maintenance, repair, and sometimes replacement of major home systems (such as HVAC, plumbing, and electric) and some appliances. Warranties are specifically aimed to cover the service and potential replacement of appliances and home systems when problems arise as a result of natural aging and wear and tear.
Sometimes offered by a home seller as an incentive to home buyers, warranties can be a great option for buyers who are worried about older systems failing immediately after they purchase their new home, but it’s also possible to get a sellers home warranty for protection while a home is on the market. For example, an HVAC system that fails while a home is on the market can drastically reduce the home’s value or sale price—or require the seller to get costly repairs while straddling two mortgages—and a warranty can help protect against that possibility.
It is also possible to purchase a home warranty after closing; in fact, even established homeowners can often benefit from a home warranty. If the home systems have been well maintained, a warranty can be a backup or protection against unexpected expenses as the house and systems age together. Sometimes multiple systems decide to fail at the same time; since this situation is difficult to adequately budget for, a home warranty can help to fill the gap.
Home Warranty vs. Home Insurance
It’s understandable for homeowners to think, “But I already have homeowners insurance! Why would I need a home warranty?” The answer here is that insurance and warranties are similar in concept but very different in what they cover. What follows is a rundown of the major differences between a home warranty vs. home insurance.
Homeowners insurance is a critical part of owning a home and is usually required by mortgage companies. It protects against internal and external damage to a home and offers the homeowner protection from liability in the event they or a member of their family cause injury or damage to a third party. Coverage from homeowners insurance policies is typically limited to damage caused by fire, property crime, certain weather events, and some types of water damage, and it specifically excludes system or appliance failures caused by normal aging or wear and tear. Homeowners insurance will also not cover damage from poor construction or appliances that have been installed incorrectly.
What does a home warranty cover? Home warranty services include many of the expensive and unexpected failures that homeowners insurance excludes. Together, homeowners insurance and a home warranty create a strong home protection plan. The home will have coverage for accidents and damage as well as age-related failure, and in some cases, both types of protection are necessary. If a hot water pipe bursts and floods the basement, the home warranty will cover the repair or replacement of the pipe, and the homeowners insurance may cover the damage to the walls, ceiling, carpeting, and any possessions that were damaged as a result of the burst pipe.
Factors in Calculating Home Warranty Cost
The concept of a home warranty is new to many homeowners and can be confusing in terms of what costs are involved and how and when they’re paid. There are three basic components to the total cost of a home warranty: the premium, the service fee, and the cost of additional coverage beyond the basic contract plan. Homeowners will want to take all three into consideration when budgeting so there are no surprises when they make their first service call.
The premium is the cost of purchasing the actual warranty—what the homeowner pays the home warranty company in exchange for coverage. Similar to an insurance premium, this can be paid annually or may be broken down into monthly or quarterly payments, depending on the warranty company and the homeowner’s preference. Home warranty companies will set these premiums based on leveled packages, with starter packages including only basic home systems costing the least and higher-level packages that include appliances costing more.
In addition to the premium, homeowners will want to plan for service charges when they file a claim. Similar to an insurance co-pay or deductible, the service fee is charged any time a professional visits the home for maintenance or repair and is usually in the neighborhood of $55 to $150, though the exact cost will vary between plans and providers. This fee should be clearly laid out in the contract, which should also note whether the fee is per event or per visit. For example, if a contractor needs to visit three times for the same repair, will the service fee be charged once, as it’s only one repair, or will it be charged three times for three separate visits?
Service charge rates go hand in hand with the level of coverage the homeowner has selected. More expensive policies will often feature lower service charges—with homeowners essentially prepaying for the service charges with a higher up-front cost—while homeowners who have less expensive policies will find that they pay less in premiums but will usually incur higher service charges when the warranty is used.
Home warranty packages traditionally cover home systems and can be upgraded to packages that include appliances, but there may be specific items the homeowner would like to have covered that aren’t available in a package. Pools and spas, well pumps, sump pumps, septic systems, and other expensive-to-replace items can often be added to a policy as individual line items for an additional charge.
While it’s likely that most homeowners don’t need to cover every appliance and system in their home, repair and replacement of some items (and the cost to repair the ensuing damage if they fail) may make it worth adding them to the policy. For instance, this add-on coverage would come in handy if a home’s well pump were to fail in the middle of a hard freeze in the winter. Homeowners who have a pool in their yard may want to opt for one of the best home warranties for pool coverage, as pool repairs can be an expensive out-of-pocket cost without this additional warranty coverage.
Types of Home Warranty Plans
Most home warranty companies feature plans with different levels of service so customers can select the plan that most closely meets their needs without paying for coverage that doesn’t meet their needs. Some companies break their plans down into more specific combinations, but the basic plan structure separates home systems from appliances and then offers add-ons as needed.
The basic whole-home systems that keep a home running are typically covered in a system plan. The systems are often broken down into components that are listed separately, including the following:
- Air conditioning
- Water heaters
- Water dispensers
- Electrical systems
Many system plans include smoke detectors and doorbells that are hard-wired or linked. Some policies also include central vacuums, while others list those as add-ons. Before choosing a home warranty, it’s a good idea for a homeowner to closely read what is covered in a system plan and what is not. If a policy doesn’t list several of the systems, there may be a more cost-effective plan elsewhere that is a better fit.
As the name suggests, appliance plans cover the freestanding appliances that are not covered as part of a basic home systems warranty. Some commonly covered appliances include the following:
- Ranges and ovens
- Washers and dryers
- Built-in microwaves
- Trash compactors
Some policies cover garage door openers as well, but others do not.
This is an area for homeowners to study closely before signing a contract: Many policies limit coverage, for example, to the main kitchen refrigerator and exclude basement or garage refrigerators or chest freezers unless they are added on separately. Also, maintenance and documentation requirements can be stringent for accessing this coverage, so it’s important that homeowners are clear on what’s required.
Combination plans are packages that combine systems and appliance plans for comprehensive coverage. These are the most expensive plans but cost less than purchasing two separate policies, one for systems and one for appliances. In some cases, the combination plan isn’t preset but rather functions as a kind of a la carte plan, where customers can select the systems and appliances they would like covered. Add-ons will increase the overall home warranty plan cost but may be worth it for homeowners who want comprehensive coverage.
Home Warranty Coverage Limits
Home warranties have an undeserved reputation for being scams or unnecessary add-ons to home sales. While these policies are not always necessary, their questionable reputation stems mostly from the fact that, as with any policy, they have a number of exclusions and conditions. Before purchasing a home warranty, it’s very important for a homeowner to carefully read the exclusions section of the policy and ask the agent specific questions.
First, nearly all policies have a maximum coverage limit. This isn’t often an issue, but if multiple systems happen to fail during the policy period, it’s possible for homeowners to run out of coverage—for instance, if the policy paid for the complete replacement of an HVAC system and then the electrical system failed and also needed replacement. In addition, most policies have coverage limits by appliance or system. If the policy has a limit of $1,000 for range repair and replacement and the cost of the replacement is $1,800, the homeowner will be responsible for the $800 beyond the coverage limit.
Finally, many home warranty plans have conditions that must be met in order for the warranty to apply. The systems and appliances that are covered must be appropriately serviced and maintained; if the furnace hasn’t been examined by a professional in 15 years and then fails, the warranty company may refuse to cover the replacement cost, whereas the same furnace that has been routinely maintained every 2 years (with the documentation to prove it) may be covered fully.
Home Warranty Cost by Month for Popular Providers
It’s a good idea for homeowners to consider established companies with proven track records. But it can be difficult to compare prices because different companies package their policies in different ways. Some of the best home warranty companies have clearly defined rates and packages that will help customers get an idea of how to compare plans.
American Home Shield
American Home Shield is one of the best-known home warranty companies in the market. Its coverage and cost follows a set, easy-to-understand formula so customers will know exactly what they’re getting and what they’re paying for. Customers can choose from three levels of coverage, add the size of the home, decide how much to pay for service calls, and determine any add-ons, and American Home Shield will provide a quote.
- ShieldSilver covers parts of 14 major systems.
- ShieldGold is a combination plan that adds nine appliances to the systems covered in ShieldSilver.
- ShieldPlatinum adds roof-leak repairs, HVAC tune-ups, air-conditioning refrigerant, and coverage of code violations and permits for the most complete coverage available.
With any of these plans, customers can set their service-call fee at $75, $100, or $125. Customers can learn more about AHS in our American Home Shield review.
Choice Home Warranty
Choice Home Warranty is also a long-standing, award-winning provider of home warranties. Its plans are completely customized to the needs of the buyer, with a choice between two protection plans:
- The Basic Plan covers 15 systems and appliances including heating, electrical, plumbing, some kitchen appliances, ductwork, garage door openers, and ceiling and exhaust fans.
- The Total Plan covers everything included in the Basic Plan with the addition of air conditioning, refrigerators, and washers and dryers.
Choice offers options of many add-ons such as pools and spas, second refrigerators, sump pumps, well pumps, and septic systems. Choice Home Warranty prices are based on the place of residence, type of home, size of home, and the desired level of protection, and customized plans mean customers pay only for what they need and nothing more. Customers can request a quote on the Choice website to determine how much their plan will cost. Our Choice Home Warranty review can help homeowners learn more about this company.
First American Home Warranty
First American has been providing home warranties for more than 35 years and has honed its pricing structure to meet the needs of a wide range of customers. Pricing varies regionally, so the best way for a homeowner to find out exact costs is to call an agent or use the online price quote system.
The company’s approach to plans is slightly different from that of other companies and is based on evidence that many homeowners are more concerned about the sudden failure of consumer appliances.
- The Starter Plan, which starts at as little as $42 per month, is an appliance plan that covers dishwashers, kitchen refrigerators, range hoods, microwaves, ovens and cooktops, and some whole-home systems like plumbing and electrical.
- The Essential Plan starts at $52 per month and includes the addition of appliances such as washers and dryers and trash compactors. It also includes water heaters, garage door openers, and HVAC systems.
- The upgraded Premium Plan adds more major home systems, including garbage disposal, central vacuum, mini-split systems, and window air-conditioning units. This plan starts at $67 per month.
Excellent coverage limits mean that choosing to customize a plan with First American will result in specific, high-level coverage.
AFC Home Club
AFC Home Club (America’s First Choice) has developed a wide range of coverage programs. The pricing of each program is affected by the size of the home and the selected service fee (options are $75, $100, and $125), plus any selected add-ons, including pools, spas, tankless water heaters, sump pumps, and septic systems.
- The Systems Plan is just that—it covers HVAC systems, electric, plumbing, ductwork, and water heaters.
- The Silver Plan is an appliance plan, and laundry appliances, kitchen appliances (including a single kitchen refrigerator), and the garage door opener are included.
- The basic combination plan, called the Gold Plan, combines the Systems Plan and the Silver Plan for coverage of systems and most appliances, excluding plumbing stoppages, microwaves, and ice makers.
- The Platinum Plan covers everything in the Gold Plan plus those exclusions.
An added benefit of AFC Home Club is that customers can select any qualified technician to perform the service, repair, or replacement—they’re not limited only to technicians the warranty company has contracted with.
Cinch Home Services
Cinch Home Services prides itself on transparency—the company promises no hidden fees or exclusions and a clear explanation of what’s covered. To accomplish that, Cinch provides a list of systems and appliances and three straightforward plans.
- The Appliances Warranty Plan, starting at $27.99 per month, covers a wide range of kitchen and laundry appliances.
- The Built-In Systems Warranty Plan covers heating, ductwork, air conditioning, plumbing (including whirlpools and sump pumps), electrical (including doorbells and smoke detectors), and garage door openers, starting at $32.99 per month.
- Upgrading to the Complete Home Warranty Plan, starting at $39.99 per month, provides coverage of both appliances and systems, and also provides an extra benefit: Should customers need to use their homeowners insurance, Cinch will reimburse up to $500 toward meeting the deductible.
An unusual element of Cinch’s coverage is that the policies provide protection against unknown pre-existing conditions, so if something breaks down as a result of an issue that occurred before the house was purchased, it’s covered.
Do I Need a Home Warranty?
Someone who is purchasing a relatively new home, especially if many of the systems and appliances are still under their original warranties, may not need a home warranty. That said, new homes have complex systems that are often automated, which leaves a lot of places for things to go wrong. A warranty may be worth it just for peace of mind—a buyer who is stretching their budget to purchase their dream home may not have a lot of extra resources and may find that a warranty helps them feel more secure. But there are some conditions for which a home warranty is a good idea.
Aging Appliances or Systems
Older homes have a lot going for them—charm, history, quirky details…ancient furnaces, aged water heaters, and geriatric water-based heating systems. Many people purchase older homes in anticipation of modernizing the systems and keeping the charm, but there’s a huge risk factor in that plan, especially if several of those older systems give way before they can be replaced.
A home warranty can protect against that and can help save a lot of money on repairs and replacements during the process of bringing the home up to snuff. Current owners of older homes may find that a warranty can be a great protection if there’s a possibility that several systems may need replacement at the same time (though it would be worth consulting the policy to understand limitations in coverage)—and having a warranty can save money and buy time to plan while providing some additional peace of mind.
Home appliance and system replacements are expensive. Maybe the homeowner is considering upgrading their kitchen appliances but can’t afford the six-burner professional stove that they really want. As a homeowner, it makes sense to plan for improvements to make in the future. The problem with those plans is that one ill-timed problem can suck up a chunk of savings and delay getting to improvements.
A home warranty can protect a homeowner’s savings and budgeting plans by covering the appliances they have now. When the dryer breaks down and needs replacement, the warranty can cover the cost so homeowners don’t have to dip into a carefully budgeted savings plan for the new stove.
Inexperience With DIY Repairs
Some new homeowners come on the scene with their tool belt already in place, ready to take on the challenges of refacing walls, replacing condenser coils, and draining their own water heaters. Others come in as complete strangers to the mysteries of home repair, especially those who haven’t lived in a single-family home before. YouTube has a lot of home repair videos, but someone who is completely unfamiliar with the territory may be skittish about opening up the back of a washer to check a drain. A home warranty can take the financial sting out of calling in a professional by limiting the cost of the repair to the service-call fee, and it can prevent homeowners from endangering themselves or their home while trying to save the cost of a contractor.
Home Buying and Selling
The best home warranty companies protect both buyers and sellers—and while they’re primarily aimed at buyers, they may be even more useful to the sellers. Home pricing is a carefully calculated formula of how much the home is worth, how much it could sell for, and what aspects of the home may need to be upgraded by the buyer.
If the seller is also buying a new home, finances can be very tightly budgeted, especially if there’s a new mortgage to be paid. A catastrophic system failure while the house is on the market can be devastating, as the house can’t sell without the system, but paying for the replacement may be difficult or impossible for the seller.
After the sale is made, a warranty protects the seller from demands that they cover a system failure that occurs in the first year after the sale. It can also make buyers feel secure that they won’t need to make such demands of the seller and can instead just make a claim on the warranty.
How to Save Money on Home Warranty Cost
Since home warranties are less common than homeowners insurance and are not required by lenders like insurance coverage is, many homeowners are not familiar with this type of coverage and may rightly wonder, “Are home warranties worth it?” Maintenance costs add up quickly, and unless their home has brand-new systems and appliances, there is a good chance that a homeowner will need to pay for a repair sooner or later. In this regard, home warranties can pay for themselves and then some. Additionally, with home warranty prices typically falling between $264 and $1,425, most homeowners will be able to find a plan in their price range. However, there are some ways homeowners can make sure they’re getting the best price, including the following:
- Request multiple quotes. Getting quotes for home warranty price comparison and asking about discounts is a good way to avoid overpaying.
- Consider a basic plan. If paying for a premium plan isn’t feasible, it may still be worth it for a homeowner to opt for a basic plan that covers features that would be the biggest financial burden to repair.
- Ask about discounts. Some home warranty companies may offer a discount if you take out a multiyear policy or pay the annual fees up front.
Questions to Ask About Home Warranty Coverage
Home warranties can provide great security and peace of mind, but they also come with potential pitfalls and exclusions, so it’s important for homeowners to be clear on what a policy covers and how to use it. Before signing a contract, it’s a good idea for customers to get clear and specific answers to these questions.
- What kind of documentation is necessary to prove that systems or appliances have been maintained in order to make a claim on the warranty?
- What are the coverage limits per claim and overall?
- How much is a service call? Is a fee assessed per visit or per event? How long can an “event” last?
- Do you cover refrigerant?
- Do you cover pre-existing conditions?
- Do I pay the service fee to the contractor, or does the warranty company pay the contractor and bill me for the service fee?
- Can I choose my own contractor for repairs and replacements, or will the company select the workers?
- Will I have some say in the brands and types of materials used for replacements? If I want something more expensive than the appliance or system that was in place, can I pay the difference for the higher-grade item?
- What upgrade options do you offer?
- How do I file a claim or request service?
- Are there any limits on how often I can file a claim?
- Is there a waiting period before I can request service?
- What is your cancellation policy?
- How long does coverage last? How and when can I renew my contract?
There are lots of layers and details for homeowners to sort out when choosing the best home warranty for their needs. The following frequently asked questions will cover some additional and more specific questions that may come up and should help homeowners decide if a warranty might provide extra financial security and peace of mind.
Q. What does a home warranty cover?
Home warranties are service contracts for the whole-home systems and appliances in and around the home. They’ll cover the cost of service, repair, and replacement of covered systems and appliances less a per-visit service fee.
Q. What is the difference between a home warranty and homeowners insurance?
Home warranties cover repairs and the replacement of home systems and appliances that are needed as a result of age or wear and tear. They do not cover damage. Homeowners insurance covers damage to the home, inside and out, that results from certain covered events, but it will not cover incidents related to the age of a system or appliance. Together, insurance and warranties provide comprehensive home protection.
Q. Can I buy a home warranty any time I want?
While it’s common to see home warranties discussed extensively around buying and selling homes, home warranties can be purchased at any time, although it’s common for policies to include a waiting period before coverage begins.
Q. What does a home warranty not cover?
Home warranties do not usually cover safety checks, regular annual maintenance (unless the maintenance is in the guise of a repair), or damage or failure due to unforeseen events such as weather, fire, and floods. They also do not cover failure that is a result of a DIY repair gone wrong.
Q. Do home warranties cover washing machines?
If it’s in the policy, it’s likely covered! Most home warranty companies offer an appliance plan that includes washing machines.