Are Home Warranties Worth It?

By David Cusick | Advertiser Disclosure

If you’ve been looking into buying a home warranty for coverage on major home appliances and systems, you may have questions regarding the benefit of purchasing a home protection plan. In this article, we’ll detail what a home warranty covers, how much a home warranty costs, and our recommendations of top home warranty providers.

What is a home warranty?

A home warranty is an extra layer of protection for your home appliances and systems, covering the repair costs for items that break down due to normal wear and tear. Typically, coverage under a home warranty plan lasts for one year, with contract fees paid monthly or annually.

A home protection plan not only saves you money, it provides peace of mind that your broken appliance or system will be repaired in a timely manner. With a network of certified service technicians, a home warranty provider does the screening process for you, sending trusted contractors to your home to fix the appliance or system in question.

What does a home warranty cover?

Typically, a home warranty covers major home appliances and systems, such as:

  • Refrigerator
  • Oven/stove/range 
  • Clothes washer and dryer
  • Electrical system
  • Plumbing system
  • Air conditioning
  • Dishwasher
  • Water heater

The best home warranty companies offer tiered plan options which provide customers with the choice of a basic or comprehensive coverage plan. Many home warranty companies, like American Home Shield and Select Home Warranty, separate their plan options into an appliances plan, systems plan, and combo plan, giving customers the choice of covering just appliances, just systems, or a combination of both.

Additionally, home warranty providers will often offer coverage on optional items like a sump pump, well pump, pool, guest unit, and spa.

Coverage limitations and exclusions

While home warranties cover home repairs and replacements, they don’t cover everything. Here are some conditions that aren’t covered under a home warranty:

  • Routine maintenance, such as regular cleanings, on appliances or systems
  • Cosmetic damages
  • Detectable pre-existing conditions
  • Improper maintenance or installation
  • Items covered under a manufacturer’s warranty  

We recommend getting a home inspection before your contract goes into effect to ensure an appliance or system is in good working condition. The process usually includes a visual inspection to confirm the item is structurally sound and a mechanical test to ensure that the item is operational.

How much does a home warranty cost?

When deciding whether or not to purchase a home warranty, you should consider the costs that come with purchasing a protection plan. Usually, home warranties require a premium and a set service fee. Some providers also charge a cancellation fee if the plan is terminated after a certain period of time.

Premium

The premium is the amount that you pay for your home warranty plan. Typically, premiums are paid out monthly or yearly, with discounts associated with an upfront or multi-year payment. Your premium is based on factors such as the amount of items your plan covers, where you live, and additional coverage you elect to receive. On average, a home warranty costs between $300–$600 a year.

Service fee

A service call fee, or deductible, is paid every time a technician comes out to repair or replace the broken item. Typically, the deductible is a fixed amount, though some companies like America’s First Choice Home Club and American Home Shield allow you to increase your service fee to lower your monthly premium. On average, a service fee costs between $75–$125 per claim.

Coverage caps

A coverage cap is the dollar amount a home warranty provider will cover on a broken appliance or system. Coverage caps can be an aggregate amount on all appliances and systems or they can vary from item to item. For example, your provider could set an annual aggregate amount at $15,000 or put a $1,000 yearly cap on air conditioner repairs or replacement.

Cancellation fee

Most companies charge a cancellation fee associated with terminating your home warranty contract. In most cases, no fee is charged if the contract is cancelled within the first 30 days. However, if cancellation occurs after the first 30 days, customers are usually charged between $50–$75.

How to choose a home warranty

Before selecting a home warranty, you should consider your budget and your home protection needs. For example, if you mostly need protection on items in the kitchen, consider a protection plan that covers major kitchen appliances. To determine the best home warranty for you, get quotes from multiple providers to compare coverage and pricing.

Frequently asked questions about home warranties

How does a home warranty work?

Once you’ve purchased a home warranty protection plan and coverage begins (usually 30 days after signing a contract), you’ll be able to file a claim with your provider if a covered item breaks down.

Once the claim is processed, a pre-arranged service technician will be sent to your home to inspect the appliance or item in question. If needed, the contractor will make the repair or schedule a follow-up appointment to complete a replacement. At this time you’ll pay the set service fee.

Who can buy a home warranty?

Home warranty coverage can be purchased by homeowners, home buyers, sellers, and real estate agents.

How long does a home warranty last?

Most home warranty contracts last one year, with the option to renew the contract at the end of the term. Some home warranty providers offer longer contracts with discounts on multi-year contracts.

What’s the difference between a home warranty and homeowners insurance?

Homeowners insurance covers structural damages to your home from natural disasters, fire, or theft, whereas a home warranty covers repairs and replacements on major systems and appliances that break down due to normal wear and tear.

Our top home warranty providers

Below is a comparison chart of coverage and pricing from some of the best home warranty providers in the industry.

Plan options
Monthly premiums
Deductibles
BBB rating
Additional benefits

Plan options

4 + optional add-ons

Monthly premiums

$50–$60

Deductibles

$75–$125

BBB rating

B

Additional benefits

Offers policyholders the ability to customize their own coverage

Plan options

2 + optional add-ons

Monthly premiums

$36–$44

Deductibles

$60–$85

BBB rating

B-

Additional benefits

Doesn’t deny coverage based on the age of systems or appliances

Plan options

3 + optional add-ons

Monthly premiums

$36–$38

Deductibles

$75

BBB rating

B+

Additional benefits

Covers items that have been improperly installed, modified, or maintained

Final thoughts

A home warranty covers the cost of unexpected repairs and replacements for major home appliances and systems. As your home experiences extreme weather and varying conditions, items in your home can become strained and prone to breakdowns. A home warranty provides you with a security net, assuring you that if your heating system goes out when it’s below freezing or your air conditioner busts in the middle of summer, you’re covered.

With a home warranty from a top provider like American Home Shield, Choice Home Warranty, or First American Home Warranty, you can rest assured that you’ll receive comprehensive and affordable coverage along with industry-leading customer service—helping make your home warranty worth the cost.

Looking for more information on home warranty companies? Check out some of our other expert reviews to get all the details you need. Remember, each of these companies gives a free quote.

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