What Is a Home Warranty?
A home warranty is a plan that covers the majority of the cost of repairing or replacing your major home systems and components. When a covered item breaks or stops working due to normal use, the warranty company pays for the repair or replacement services.
Most plans include appliances such as your air conditioner, furnace, refrigerator, water heater, washer, and dryer. You can add on coverage for extra components such as your swimming pool, sump pump, or septic tank.
Home warranty plans are usually renewable every year. Home warranties don’t cover the structural aspects of your home, such as your windows and flooring.
How Does a Home Warranty Work?
When an appliance malfunctions, your home warranty company helps fix the issue as soon as possible.
Here's how it works:
Your appliance or home system breaks or stops working.
You submit a service request through your home warranty company.
The warranty company arranges for a contractor to diagnose and fix the appliance. Many warranty companies have agreements with certain providers, while others let you choose the contractor.
Your appliance or home system is repaired or replaced under the contract terms. As an alternative, they may provide cash for you to replace the appliance.
You pay a service fee for the claim, but your home warranty pays the rest of the cost. Your warranty only covers what’s in your contract, so not every appliance or system is covered.
Cost of a Home Warranty Near You
Depending on your geographic location, the cost of a home warranty may run higher or lower than the national average. Here are some price ranges for major metropolitan areas across the country.
Las Vegas, NV: $135–$726
Boise, ID: $260–$400
Omaha, NE: $246–$4,086
New York: $361–$3,858
San Francisco: $738–$6,255
Chicago: $219–$1,576
Hartford, CT: $236–$1,054
Kansas City, MO: $288–$970
Orlando, FL: $125–$1,933
Home Warranty Cost by Plan Type
While most home warranty plans have a baseline level of coverage, there are different types of plans that vary in cost. You can choose the plan that fits your needs so you don’t end up paying for extras that you know you won’t use.
| Plan Type | Cost |
|---|---|
| Appliance Plans | $360 – $540 |
| System Plans | $360 – $540 |
| Combination Plans | $545 – $1,425 |
Appliance Plans
The average cost for a home warranty appliance plan is between $360 and $540 per year. Home warranty appliance plans cover appliances in your home, but not systems such as plumbing or electrical. These plans usually cover:
Refrigerators
Stoves
Washers and dryers
Built-in microwaves
Dishwashers
Trash compactors
Some plans may cover things like garage door openers, but others won’t. Review your plan details with a careful eye so you know exactly what’s covered. These plans usually have some exclusions, like covering they will cover the main refrigerator in your kitchen but not the extra refrigerator in your basement unless it’s added to the policy for an extra fee.
System Plans
Home warranty system plans usually run between $360 and $540 per year, plus charges for service call fees, which usually run between $75 and $125. These plans generally cover any crucial home systems that keep a home running, including:
HVAC
Plumbing
Electrical
Water heaters
Some system plans also include any hard-wired smoke detectors and doorbells, but central vacuum systems are usually listed as add-ons.
Combination Plans
The average price of a combination home warranty plan is between $545 and $1,425, plus any service call charges which are assessed on a per-visit basis. Combination plans include both systems and appliances and are the most comprehensive version of a home warranty plan.
In some cases, you can pick and choose which systems and appliances you would like covered to design your own plan, so you determine what’s included in the home warranty on an individual basis.
Home Warranty Cost Breakdown
There are a few basic components that make up most home warranties: premiums, service fees, and add-ons.
Premiums
The average range for premiums for home warranties is $200 to $1,800 per year, depending on the company you choose. Premiums for home warranties are the annual or monthly cost you pay for coverage, kind of like your homeowners insurance premiums. When looking at homeowners insurance vs. home warranties, however, home warranties come with two other types of costs.
Deductibles
Deductibles, also called service fees, associated with home warranties usually run around $75 to $125 per call. Unlike premiums, which you pay every month regardless of whether or not you use your plan, deductibles are only assessed when you have to have a professional come to your home for repairs or maintenance. The amount of your deductible can vary based on the premiums you pay, and typically the higher the premiums, the lower the deductible.
Add-Ons
Add-ons to home warranty policies typically cost between $2 and $35 per month, depending on the selection. These are upgrades you can make to a standard policy to include things like your swimming pool, spa, electronics, and septic systems.
| Add-On | Price Per Month |
|---|---|
| Additional refrigerators | $2 |
| Roof leak repair | $8 |
| Well pump | $8 |
| Central air conditioner | $10 |
| Electronics | $10 |
| Pool and spa | $20 |
| Saltwater pool | $35 |
Home Warranty Cost Factors
While most home warranty policies fall within a range, there are several factors the company will take into account when preparing your quote. These could include:
Your coverage level
Deductibles
Add-ons
The size of your home
Your service call fee amount
For example, adding an appliance plan to a system’s policy usually adds $20 a month, and add-ons to policies average around $35 per month.
Home Warranty Coverage Limits
As with any insurance policy, home warranty policies have conditions, exclusions, and coverage limits. Most policies specify a maximum coverage limit, or the amount they will pay during a policy term. You may never reach this maximum payout amount, but if multiple systems in your home break during a policy term, it’s possible you may end up paying out of pocket if your policy hits the limit.
For example, many home warranty companies start with a base coverage limit of $2,000 per system or appliance. However, they have the option to increase coverage in $1,000 increments per system or appliance by paying an additional annual premium.
Also, many policies require that you have your systems and appliances serviced regularly for coverage to apply.
What to Consider Before Buying a Home Warranty
Home warranties can be the right choice for some homes, but not all. Make sure you consider the costs and coverage levels before signing up. If you decide on a home warranty, compare plans and providers to determine what’s best for you, your home, and budget.
Age and Condition of Your Appliances
If your appliances like your refrigerator and furnace are only a few years old, it’s unlikely that they’ll break and need warranty coverage. Newer appliances might still be under their manufacturer’s warranty as well and many home warranties won’t cover items that are under another warranty.
If you’re buying a home, ask about what appliances are under warranty (either the manufacturer’s or home). Get the maintenance history of any appliances so you're aware of any issues. Some home warranty claims are denied due to a lack of proper maintenance or because of incorrect installation.
Your Ability to Pay Out of Pocket
If you’ve just paid a large downpayment on a house and don’t have a lot of extra cash, a home warranty can help you avoid an expensive fix you can’t otherwise afford. But if you have some savings in an emergency fund to cover unexpected costs, you may not want to pay the premium on a home warranty plan.
Coverage Limits
Home warranty plans don’t cover everything. They often don't cover repairs due to pre-existing issues with appliances.
Home warranties also have coverage limits per repair, per appliance, or per year. For example, if your high-end washing machine gives out, the company may only replace it with a less expensive model.
Read through the entire plan's terms and conditions to ensure you know exactly what you’re buying.
Service Providers
Most home warranty companies have agreements with certain contractors, so you don't get a choice of who comes to your house. But some companies allow you to choose, so if there’s a plumber or electrician you like, look for a plan that allows any contractor.
Whether You’re Selling Your Home
If you’re selling your home and want to cover any unexpected costs that come up before closing, a home warranty might make sense. If you’re buying a home and the seller offers to transfer their home warranty, read through the plan details carefully.
The Price of a Home Warranty
Home insurance covers enormous expenses, such as if your house burns down. But home warranties cover smaller costs such as a broken dishwasher. If you’re able to pay for these fixes yourself, a home warranty may not be cost-effective.
Total up what you’d spend in a year through a home warranty (including fees and accounting for any coverage limits) versus what you might pay if one of your appliances break.
Customer Reviews
Before buying a home warranty plan, research the company and ensure it's reputable. Look at online reviews across several websites. Visit the Better Business Bureau (BBB) and note any complaints against the home warranty company. Aim for a BBB rating of A or higher.
