Your home may be the most significant investment you’ve ever made. While being a homeowner is rewarding, it can also involve costly, unexpected repairs. Whether it’s a broken air conditioner in July, a furnace failure in the dead of winter, or a faulty refrigerator, repairs or replacements can cost thousands.
Home warranties may benefit homeowners who want to avoid costly repair surprises — especially those with high-end appliances. But warranties can be pricey, and coverage varies by company.
A home warranty is a service contract that helps pay to repair or replace appliances and major home systems.1 You can buy one anytime and choose the coverage level that fits your needs.
Depending on the plan, basic service contracts may cover only kitchen appliances, while comprehensive plans cover all household appliances, HVAC, plumbing, and electrical systems. Some companies also offer add-on coverage for roofs, pools, hot tubs, septic systems, or lawn sprinkler systems.
After you buy a warranty, there’s typically a waiting period between 30 and 90 days. Once that period ends, you can start requesting repairs.
When you need repairs for a covered item or system, the warranty company will arrange for a service technician to visit your home. You’ll typically pay a service fee for each visit, which can cost between $65 and $125. The service tech will diagnose the problem and then make repairs.
Most home warranties last for one year, but some companies offer three- or five-year plans.
A home warranty can provide peace of mind to new homeowners — especially if they’re unsure about the age and condition of the appliances and home systems.
Benefits include the following:
Access to vetted contractors: When you contact the home warranty company, it’ll connect you with a partner service technician. Technicians are vetted, licensed, bonded, and insured, so you can feel confident they’ll repair the issue properly.
Protection for your savings: When you’re a new homeowner, your budget may be stretched just about as far as it can go. Repairing an air conditioner or fixing a broken washing machine is expensive. A home warranty can provide added protection so you won’t have to drain your savings to cover unexpected repairs.
Easier budgeting: A home warranty has a fixed monthly cost, making it easier to work into your budget. Service fees are relatively low, so repair costs are more manageable.
A home warranty policy covers items or systems that stop working due to age, wear and tear, or mechanical issues. Warranties typically cover:
Heating, ventilation, and air conditioning (HVAC) systems
Electrical systems
Plumbing systems
Refrigerators
Ovens
Washers and dryers
Garbage disposals
Coverage varies by company and plan. While a basic home warranty may cover only your kitchen appliances, a premium plan may provide more comprehensive coverage for electrical, plumbing, and HVAC systems. Warranty coverage typically excludes accidental damage or pre-existing problems.
You can sometimes buy add-on coverage for pools, water heaters, lawn sprinkler systems, or septic pumps.
Although home warranties can protect your home’s systems and appliances, they typically exclude the following:2
Damage covered by homeowners insurance: Home warranties cover wear and tear, mechanical breakdowns, and aging systems and appliances. In contrast, home insurance typically covers damage caused by natural disasters, theft, or vandalism.3
Cosmetic damage: Home warranties don’t cover scratches, dents, chipped paint, or other surface-level imperfections.
Structural issues: Home warranties won’t pay to repair foundation issues such as cracks or settling.
Pre-existing issues or problems that develop during the waiting period: Home warranties typically exclude issues that existed before coverage started or developed during the waiting period.
Damages related to lack of maintenance: Home warranty companies often require service records showing regular maintenance — especially for major home systems. If a system hasn’t been regularly serviced or maintained, the company may deny your claim.
A home warranty can offer significant savings. For example, imagine you have a home warranty that costs $600 per year. If your ducted central air conditioning system breaks down, the repair could cost up to $2,000.
If your service fee is $125 and the warranty covers the full repair, your out-of-pocket cost would be $725 ($600 + $125). That means you’d save $1,275 compared to paying the full repair cost on your own.
Your coverage amounts depend on your policy, what components broke, and your policy’s coverage limits.
Home warranties can cost between $15 and $80 per month. A basic plan that covers kitchen appliances will be cheaper than a comprehensive plan that protects appliances, electrical systems, and HVAC systems. Adding optional coverage to your warranty — such as for a pool, sump pump, or sprinkler system — can increase costs, too.
In addition to your monthly premium, you’ll pay a service fee, typically between $75 and $125, for each repair visit.
Overall, your home warranty costs will depend on several factors:
Many companies offer home warranty plans. Based on coverage, plan options, and cost, the following are some of the best home warranty companies available:
Reading the fine print before signing a home warranty agreement is essential. Make sure you understand the following key details:
Emergency costs: Home warranties typically only pay for service technicians during normal business hours. The home warranty company may charge a higher fee if you need after-hours service.
Work guarantees: Some home warranty companies guarantee their work for a specific period, such as 30 or 90 days. If the repair fails after that guarantee period, you’ll have to pay another service fee to fix the item or system.
Cancellation terms: Cancellation policies and fees vary by company. Some companies allow you to cancel anytime but charge a $50 cancellation fee. Others say their warranties are noncancelable after the first 30 days.
Each company’s terms and conditions can vary significantly. To avoid surprises, it’s important to review sample contracts for exclusions, coverage limits, claim requirements, and work guarantees.
Although home warranties can be helpful, they can also be expensive. These are some other options that may be a better fit:
Emergency fund: Financial experts typically recommend setting aside 1% to 4% of your home’s value in an emergency fund every year to cover maintenance costs.4
Equipment breakdown coverage: If you have a homeowners insurance policy, you may be able to add equipment breakdown coverage. This endorsement won’t cover wear and tear, but it’ll pay to repair or replace an item after an electrical surge or mechanical breakdown.
Manufacturer warranties: New appliances typically include a manufacturer’s warranty that covers defects or breakdowns for a set period — usually six to 12 months from the purchase date.
A home warranty complements home insurance and isn’t meant to replace it. While a home insurance policy covers your home from damage related to storms, fires, theft, and other perils, a home warranty covers your appliances and systems for issues related to age, mechanical breakdowns, and wear and tear.
Together, a homeowners insurance policy and a home warranty can protect your home and give you peace of mind.
If you’re not sure if a home warranty is right for you, answers to the following frequently asked questions can help you make a decision.
Whether a home warranty is worth the cost depends on the plan, exclusions, and your home’s condition. It may not be worth the cost if your home is new and your appliances are covered under a manufacturer’s warranty. But a home warranty can help pay for expensive repairs if you have an older home with older appliances.
No. Unlike homeowners insurance, which lenders typically require when you buy a home, home warranties aren’t required.
While you can purchase a new home warranty during the homebuying process, you can also buy a home warranty even if you’ve lived in your home for years.
Home warranties can be expensive, and they have coverage limits and exclusions that may reduce their effectiveness in helping homeowners save money.
Home warranties typically cost between $15 and $80 per month.
Realtors often encourage home warranties because they give buyers peace of mind, knowing they’ll have protection if an appliance or home system breaks down after the purchase.
Home warranties won’t cover cosmetic damage, pre-existing issues, or problems caused by a lack of maintenance.
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