How Much Does a Home Warranty Cost?
Depending on the homeowner and the home, getting a home warranty can be a good idea—but other times, it can be unnecessary. It’s easier to decide if a home warranty is the right choice for you if you understand how much a warranty really costs.
- Typical Range: $264 to $1,425 per year
- National Average: $600
As with an appliance or car warranty, a home warranty protects your investment from system failures. For many home buyers, especially those purchasing older homes, a 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 emergency home costs, 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. It’s critical to read the fine print and understand what is and is not covered and what conditions may exist to make claims when budgeting for home warranty cost.
What Is a Home Warranty?
A home warranty is a service contract that covers maintenance, repair, and replacement of major home systems (such as HVAC, plumbing, and electric) and some appliances. Warranties are specifically aimed at service and replacement necessary 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 worried about older systems failing immediately after purchase, but they can also protect the seller. For example, an HVAC system that fails while a home is on the market can drastically reduce its value or sale price—or require the seller to get costly repairs while straddling two mortgages—so a warranty can help protect against that possibility.
Even established homeowners can benefit from a warranty: If the home systems have been well maintained, a warranty can be a backup or protection against unexpected expense as the house and systems age together. Sometimes multiple systems decide to fail at the same time; since this is difficult to adequately budget for, a home warranty can fill the gap.
Home Warranty vs. Home Insurance
You may be thinking, “But I already have homeowners insurance! Why would I need home warranty insurance?” The answer here is that insurance and warranties are similar in concept but very different in what they cover.
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, in some cases, will offer the homeowner protection from liability in the event accidental harm occurs on the property. It is specifically limited to damage caused by fires, property crime, water, weather, and other external forces, and it specifically excludes failures caused by normal aging or wear and tear.
That’s what a home warranty is for: A warranty covers 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 leaks into the ceiling, 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 leak.
Home Warranty Cost Breakdown
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. Take all three into consideration when budgeting so there are no surprises when it’s time for the first service call.
The premium is the cost of purchasing the actual warranty—what you pay for the privilege of being covered. Similar to an insurance premium, this can be paid annually or broken down into monthly or quarterly payments. 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, you’ll need to plan for service charges when you file a claim. Similar to an insurance copay, 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. 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 you be charged once, as it’s only one repair, or will you be charged three times?
Service charge rates go hand in hand with the level of coverage you’ve selected. More expensive policies will usually feature lower service charges—you’re essentially prepaying for the service charges with a higher up-front cost—while less expensive policies cost less at the start but will incur higher service charges when you do use the warranty.
Home warranty packages traditionally cover home systems and can be upgraded to packages that include appliances, but there may be specific items you’d like covered that aren’t available in a package. Pools and spas, well pumps, sump pumps, septic systems, and other expensive-to-replace items can be added to your policy as individual line items for an additional charge.
While you probably don’t need to cover every appliance and system in your home, repair and replacement of some items (and the cost of the ensuing damage if they fail) may make it worth adding them to the policy. You’ll be grateful if your well pump fails in the middle of a hard freeze in the winter.
Home Warranty Cost: Types of 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—HVAC, electric, and plumbing—are covered in a system plan. The systems are often broken down into components that are listed separately, including air conditioning, heating, the associated ductwork, water heaters, and water dispensers. 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, you’ll want to closely read what is covered in a system plan and what is not: If your home doesn’t have several of the systems listed in one company’s policy, you may find a more cost-effective plan elsewhere that better meets your needs. System plans cost an average of $360 to $540 per year plus charges for service calls.
As the name suggests, appliance plans cover the freestanding appliances that are not part of the basic home systems covered by the systems plan. Refrigerators, ranges and ovens, washers and dryers, dishwashers, built-in microwaves, and trash compactors are some examples. Some policies cover garage door openers as well, but others do not.
This is an area you’ll want 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 be clear on what’s required. The cost for an appliance plan, on average, is $360 to $540 annually, plus service call fees.
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 for systems and 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, of course, add cost, but the pricing of a combination plan averages between $546 and $1,425, in addition to service call charges.
Home Warranty Coverage Limits
Home warranties have an undeserved reputation for being scams or unnecessary add-ons to home sales. While they 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. If you’re considering a home warranty, it’s very important 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, you may run out of coverage—so if the policy paid for the complete replacement of your HVAC system and then the electrical system fails and also needs replacement, you may run out of coverage. In addition, most policies have coverage limits by appliance or system. If your policy has a limit of $1,000 for range repair and replacement and the cost of the replacement is $1,800, you’ll be responsible for the $800 beyond the coverage limit.
Finally, many warranties 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: Plan Pricing from the Most Popular Home Warranty Companies
It’s a good idea to make sure you’re considering an established company with a proven track record. But it can be difficult to compare prices because different companies package their policies in different ways. Some of the most established companies have clearly defined rates and packages that will help you get an idea of how to compare plans.
American Home Shield
American Home Shield is one of the best home warranty companies on the market. Their coverage and cost follows a set, easy-to-understand formula so you know exactly what you’re getting and what you’re paying for. Choose from three levels of coverage, add the size of your home, decide how much you want to pay for service calls, and determine if you have any add-ons, and American Home Shield will provide a quote.
- ShieldSilver covers parts of 14 major systems and starts at $39.99 per month.
- 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, you can set your service call fee at $75, $100, or $125, and additional coverage items range from $50 to $258.
Choice Home Warranty
Choice Home Warranty is also a long-standing, award-winning provider of home warranties. Their plans are completely customized to the needs of the buyer. A typical plan from Choice is a combination plan for systems and kitchen appliances, with total coverage plans that include laundry appliances, air conditioners, and additional refrigerators. Choice offers options of many add-ons as well. Their cost formula is based on the place of residence, type of home, size of home, and the desired level of protection, and customized plans mean you’re paying only for what you need and nothing more. The average monthly cost at Choice ranges from $36 to $44, with service fees ranging from $60 to $85.
First American Home Warranty
First American has been providing home warranties for more than 35 years and has honed their pricing structure to meet the needs of a wide range of customers. Pricing varies regionally, so the best way to find out exact costs is to call an agent or use their online price quote system.
Their approach to plans is slightly different from other companies and is based on evidence that many homeowners are more concerned about the sudden failure of consumer appliances.
- The Basic Plan, which starts at as little as $30 per month, is an appliance plan that covers washers, dryers, refrigerators, ovens, cooktops, and other appliances that aren’t part of a whole-home system.
- The upgraded Premier Plan adds the major home systems, including heaters, plumbing, electrical, and water heaters.
Excellent coverage limits mean that choosing to customize a plan with First American will result in specific, high-level coverage.
America’s First Choice
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 service fee you select (options are $75, $100, and $125), plus add-ons you select, including pools, spas, and 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.
- Their basic combination plan, called the Gold Plan, combines these two for coverage of systems and most appliances, excluding plumbing stoppages, microwaves, and ice makers,
- and the Platinum Plan covers everything in the Gold Plan plus those exclusions.
An added benefit of America’s First Choice is that you can select any qualified technician to perform the service, repair, or replacement—you’re not limited to technicians the warranty company has contracted with.
Cinch Home Services
Cinch Home Services prides itself on transparency—they promise no hidden fees or exclusions and a clear explanation of what’s covered. To accomplish that, they provide 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, covers both appliances and systems, and also provides an extra benefit: Should you need to use your homeowners insurance, Cinch will reimburse you up to $500 toward meeting the deductible.
An unusual element of Cinch’s policies is that the policy provides protection against unknown pre-existing conditions, so if something breaks down as a result of an issue that occurred before you purchased the house, it’s covered.
Do I Need a Home Warranty?
If you’re purchasing a relatively new home, especially if many of the systems and appliances are still under their original warranties, you may not need one. That said, new homes have complex systems that are often automated, which leaves a lot of places for things to go wrong. You may need a warranty just for peace of mind—if you’re stretching your budget to buy your dream home, you may not have a lot of extra resources and may find that a warranty helps you feel more secure. But there are some conditions under which a home warranty is a good idea.
House or Appliances and Systems Age
Older homes have a lot going for them—charm, history, quirky details…ancient furnaces and 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 you’re ready to replace them.
A home warranty can protect against that and can help save a lot of money on repairs and replacements as you work your way through bringing the home up to snuff. Current owners of older homes may find that a warranty can be a great protection if several systems may be needing replacement at the same time (though it would be worth consulting your policy to understand limitations in coverage)—it can save money and buy time to plan while putting your mind at ease.
Home appliance and system replacements are expensive. Maybe you’re looking at the kitchen appliances and would like to upgrade but can’t afford the six-burner professional stove that you really want. As a homeowner, it makes sense to plan for improvements that you’d like to make. The problem with those plans is that one ill-timed problem can suck up your savings and prevent you from ever getting to the improvements you really want to make.
A home warranty can protect your savings and budgeting plans by covering the appliances you have now. When the dryer breaks down and needs replacement, the warranty can cover the cost instead of you having to dip into your 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 if you’re completely unfamiliar with the territory, you may be (and should be!) skittish about opening up the back of your 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 your service call fee, and it can prevent you from endangering yourself or your 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 buyers.
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 or a bridge loan keeping the seller afloat. 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.
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.
7 Questions to Ask a Home Warranty Company
Home warranties can provide great security and peace of mind, but they also come with potential pitfalls and exclusions, so it’s important to be clear on what your policy covers and how to use it. Before signing a contract, you’ll want to have 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 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?
- How do I file a claim or request service?
There are lots of layers and details to sort out when choosing a home warranty and deciding if one is right for you. The following frequently asked questions will help you get started thinking about the additional and more specific questions you’ll have and should help you 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 your 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 replacements that are needed as a result of age or wear and tear. They do not cover damage. Homeowners insurance covers damage to your home, inside and out, that is the result of unforeseen events, but it will not cover incidents related to the age of a system or appliance. Together, insurance and warranties provide a comprehensive home protection net.
Q: Can I buy a home warranty any time I want?
While you’ll see home warranties discussed extensively around buying and selling homes, home warranties can be purchased at any time.
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 your policy, it’s likely covered! Most home warranty companies offer an appliance plan that includes washing machines.