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Home /  Home Warranty Companies / How Much Does a Home Warranty Cost? (A Complete Guide)
last_updated_date Last updated: July 28th, 2021

HOW MUCH DOES A HOME WARRANTY COST? (A COMPLETE GUIDE)

PUBLISHED: Mar 17, 2021 • 6 MINS READ

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Home warranties are service agreements for repairs and replacements of home systems and appliances that, on average, cost around $25-$80 per month. There are a few additional charges in the form of optional add-ons, deductibles, coverage, and other factors.

Home warranty policies have various aspects to them that affect the prices of the plans. We have prepared a detailed breakdown of the expenses incurred while purchasing a home warranty. Keep reading to learn how to buy the most cost-effective home warranty plan for your home.

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WHAT ARE THE COSTS INVOLVED WITH PURCHASING A HOME WARRANTY?

There are a few terms you should understand regarding the home warranty cost breakdown that would be mentioned in your service contract.

You pay a monthly or annual amount called a premium that transfers the risk of facing unexpected home systems or appliance breakdowns to the company. The second component of the home warranty cost is the deductible, a small part of the claim that you as the claimant agree to pay. The cost of optional add-ons is a part of the premium payment.

Service fee and trade call fee are terms used interchangeably with deductible. Usually, you would pay the service fee to the service contractor directly. The trade call fee is a token amount that you pay in exchange for the diagnosis and repair services that a service technician offers. Since the technicians are independent contractors, the policy ensures to cover their labor costs.

When the service provider approves a repair or replacement, they may offer a cash payout if they can’t facilitate the actual service. This amount is subject to the terms and conditions of coverage caps in the service agreement. Home warranty companies that allow choice of contractor can also offer a cash payout to the customer instead of paying the technician.

home warranty cost breakdown Premium:

Most companies offer two or three plans ranging from basic warranty coverage to comprehensive or advanced coverage.

  • A basic plan usually starts at $28 per month or $300 annually
  • A comprehensive plan starts at $50 per month or $450 annually
  • An advanced comprehensive plan may go upto $800 or more annually

Deductible:

Some companies have a standard deductible, while others allow choice of deductible. The premiums are lower if you opt for a higher deductible.

  • The average standard deductible that you pay per claim is $80
  • If there is a range of deductible prices to choose from, it may be $65-$125

Optional Add-Ons:

Home warranty companies don’t deem items like pool pumps, wine coolers etc. to be risky enough to include in the main plans, but do offer coverage upon adding to the plan. Some common optional add-ons and average annual coverage costs are as follows:

  • Sewage Ejector Pump- $35
  • Inground Pool/Spa- $150
  • Water Softener & R/O Water Filtration System- $60
  • Salt Water Pool- $400

Cash Payout:

The extent of repairs or pro-rated cost of replacement determine the amount of the cash payout. It can vary from $80 to $3000. The maximum possible payout is subject to the coverage cap for the system or appliance.

WHAT DETERMINES THE COST OF HOME WARRANTY?

home appliances breakdown

Home warranty companies conduct extensive research before determining plan offerings and service provisions. We have simplified the methodology used by the home warranty industry for your convenience.

Risk Pooling

A home warranty plan is based on the same concept as insurance, though legally, it is quite different. Insurance and extended warranties operate according to the concept of risk pooling. In risk pooling, a group of people transfer certain agreed-upon risks to an entity, who takes on the liability of losses arising from those risks.

In the case of home warranty, the risk is facing unexpected home systems and appliances breakdowns as they wear out over time. External warranties are based on external risk pooling because the companies that accept the liability are third parties, the first two parties being the consumer and the manufacturer.

Why would a third party want to take on the risk? What’s in it for them?

There is always a chance there will be an unexpected home appliance breakdown and repairs will be expensive. However, some homeowners are at lower risk than others. The home warranty company can offset the costly liabilities with the premium payments from the low risk clients.

When home warranty providers price their plans, they rely on various finance professionals and statisticians to calculate the potential liability, risk probability, etc. for each possible scenario and breakdown cause. The optional item premiums and coverage caps are set accordingly.

Additional Services and Nuances of Coverage

Some companies charge high premiums by offering a variety of adjunct services including special home appliance purchase discounts, higher coverage cap, workmanship guarantee, etc.

Most home warranty companies have a range of plans according to property size. Usually, people buy plans for homes that are 5000 sq.ft. or smaller. Larger homes and multiple units require an additional fee.

Typically home warranties cover home systems and appliances of any age. However, the cash payout decreases when replacing older appliances since the company provides a pro-rated amount. The payout is also subject to coverage caps. If you have a broken refrigerator that costs $2000 to replace and the coverage cap is $1500 for the appliance, you would have to pay the remaining amount out of pocket.

Read on to compare how plan prices vary and how home warranty companies try to differentiate themselves from the competition to win your favour.

TOP 5 HOME WARRANTY COMPANIES PRICE COMPARISON

Here is a quick glimpse at the top rated home warranty companies on our platform and their special features:

Company Name Best For Monthly Cost* Annual Cost* Service Fee Offers
total home protection Budget Protection $41.47-$47.83 $519-$600 $75 $200 OFF, First 2 months free
american-home-shield Nationwide Coverage $50-$60 $600-$1000 $75-$125 – –
select-home-warranty Separate Systems-Appliances Coverage $52-$55 $580-$600 $60-$75 $150 OFF, Free Roof Coverage
choice-home-warranty Skilled Technicians $41.85-$55 $495-$600 $85 – –
home service club Customizable Plans $51.25-$79 $551-$731 $65-$125 – –

*Please note that the listed prices are of an approximate nature. For exact pricing information, please submit a free quote for a company of your choice.

HOW TO CHOOSE & BUY THE MOST COST-EFFECTIVE PLAN

Residential warranties are designed to alleviate the financial stress associated with the cost of repairs that unexpected breakdowns can cause. In that regard, they are already cost-effective and can help you save money. However, there are a few considerations you should keep in mind when choosing a home warranty plan.

Research Research the Home Warranty Companies & Plans

In order to choose the right home warranty, you need to do your research. There are many home warranty companies in the market which offer attractive plans. They generally offer plans that cover home appliances, systems, or a combination of both. Some companies even let you customize your coverage plans. You should choose one that is right for your home.

It is important to find a company that works with quality technicians, and is diligent when it comes to customer support. Some companies offer regional services with a strong technician network that may work out better for your location. Others have a nationwide presence that requires them to develop a high responsive claims management system. Customer reviews will inform you on their service quality.

You can compare these companies based on their plans, coverage & pricing, contractor service, home warranty reviews from customers, and more on homewarrantyreviews.com.

ResearchConsider Coverage Costs

You should compare the warranty plan cost and the repair or replacement costs of your home’s items. This will give you an idea as to which warranty plan option would be most cost-effective.

It would also be wise to figure out which appliances and major home systems are in need of coverage and how much you are willing to spend. It does not make sense to get coverage for items that are new and equipped with manufacturers’ warranties. Take a note of the companies that offer your ideal coverage within your desired price range.

ResearchGet Quotes

Find out the annual premiums or monthly costs of different home warranty companies. Choose one that offers the coverage you want within your budget. Get as many quotes as you can before zeroing in on one plan.

ResearchRead Through Contracts

You should thoroughly examine the details of the warranty; its coverage, deductibles, coverage caps, limitations and exclusions, and or any other pertinent information mentioned in the service contracts of home warranty companies. Many people fail to do this and are shocked to find a breakdown listed under an exclusion.

HOW MUCH MONEY CAN I SAVE WITH A HOME WARRANTY?

The average cost of home warranty usually ranges between $350-$700 per year while the monthly cost can be anywhere between $30-$75. You would also have to pay a trade call fee to the repair technician sent to your home, which costs $50-$200. If you compare these amounts with the potential repair or replacement costs of the items in your home, you will realize that your average savings are worth over a thousand dollars. Take a look below to understand how the average repair cost and replacement liabilities will affect your budget.

Appliance/ System Repair Cost Replacement Cost
Washer or Dryer
$130 – $500
>$1000
Refrigerator
$200 – $400
<$1000
Heating System
$80 – $1200
$3000 – $5000
Air Conditioning System
$20 – $2900
$5000
Oven
$130-$650
$100-$2000
Microwave
$200-$300
$90-$800
Septic system
$200-$1500
$3000-$10000
Water Heater
$100-$1000
$750-$1500

*Please note that the listed prices are of an approximate nature. For exact pricing information, please submit a free quote for a company of your choice.

WHAT DO HOME WARRANTIES USUALLY COVER?

The coverage options for each home warranty company may vary but there are some standard coverage options. Some companies design their plans as appliances-only, systems-only, and combination plans consisting of both. Other companies structure their plans into basic, enhanced, or customized plans, covering both appliances and systems. There is also the option of adding coverage for extra items that are not available in typical plans.

Here is a non-exhaustive list of a home warranty’s typical coverage –

Appliances

System

Adds-on/Optional Coverage

  • Dishwasher
    Dishwasher
  • Garage_Door_Opener
    Garage Door Opener
  • Garbagedisposal
    Garbage disposal
  • Oven
    Oven/Range/Cooktop
  • Refrigerator
    Refrigerator
  • TrashCompactor
    Trash Compactor

  • elecrtical_system
    Electrical system
  • plumbing_system
    Plumbing system
  • heating_and_duct_work
    Ductwork
  • oven_img
    HVAC System

  • Dishwasher
    Pool & Spa
  • Garage_Door_Opener
    Septic System
  • Garbagedisposal
    Roof leak
  • Oven
    Stand alone Freezer
  • Refrigerator
    Second Refrigerator
  • TrashCompactor
    Furnace

Appliances

  • Dishwasher
    Dishwasher
  • Garage_Door_Opener
    Garage Door Opener
  • Garbagedisposal
    Garbage disposal
  • Oven
    Oven/Range/Cooktop
  • Refrigerator
    Refrigerator
  • TrashCompactor
    Trash Compactor

Systems

  • elecrtical_system
    Electrical system
  • plumbing_system
    Plumbing system
  • heating_and_duct_work
    Ductwork
  • oven_img
    HVAC System

Add-ons/ Optional Coverage

  • Dishwasher
    Pool & Spa
  • Garage_Door_Opener
    Septic System
  • Garbagedisposal
    Roof leak
  • Oven
    Stand alone Freezer
  • Refrigerator
    Second Refrigerator
  • TrashCompactor
    Furnace

Apart from these items, air conditioning systems, water heaters, and other major appliances and systems are covered by many home warranty companies. The most comprehensive plans are usually the most costly. Add-ons or optional coverage entail additional expenses. You also need to understand the extent of coverage for each item and their coverage limits. You can learn more about this by reading the sample user agreement and a detailed guide on what is covered and not covered by home warranties.

WHICH COMPANY HAS THE BEST HOME WARRANTY COVERAGE?

home warranty coverage

Determining which company’s coverage is best depends on personal preference. There is no doubt, however, that a home warranty company that covers all major home appliances, systems and a large selection of optional items would be favored by most.

Leading home warranty companies, like American Home Shield, Total Home Protection, and Select Home Warranty, offer multiple plans and an extensive selection of optional add-ons that ensure complete coverage for your home. Take a look at the following companies’ coverage plans and see if they fit your needs.

$200 off
Discounts & Offers
+2months free & roof coverage

Total Home Protection

  • $500-$599 /Annual
  • $40-$50 / Monthly
  • $75 / Service Call Free
$150 off
Discounts & Offers
+2 months free & roof coverage

Select Home Warranty

  • $429-$499 / Annual
  • $40 / Monthly
  • $75 / Service Call Free
$160 off
Discounts & Offers
+2 months free & roof coverage

First Premier Home Warranty

  • $350-$499 / Annual
  • $32-$45 / Monthly
  • $60-$100 / Service Call Free

BOTTOM LINE: ARE HOME WARRANTIES WORTH THE COST?

Home warranties can act as a source of financial protection for your home’s systems and appliances. A home warranty covers multiple items for a fixed annual or monthly payment. When a covered item breaks down or fails due to wear and tear, you can claim repair or replacement service from your home warranty company. You would only have to pay the trade call fee and the repair charges would be taken care of by the company. You can save quite a bit of money this way since unexpected breakdowns can turn out to be expensive.

Home warranties can be a valuable investment and worth the cost –

  • If you don’t want to spend much on repairs or replacement of your appliances and systems
  • If you own an older home
  • If you plan on selling your home
  • If you don’t know or have the time to search for trustworthy service technicians
  • If you want the convenience of on-call services

If you are still confused and unable to take a decision, check out – How To Decide Whether Home Warranties Are Worth It?

Frequently Asked Questions

How is a home warranty different from homeowners insurance?

Home warranty companies offer repair or replacement in case a covered item fails or breaks down due to wear and tear.

Homeowner’s insurance mainly covers the structure and personal property of the insured. This insurance can be claimed even when damages occur due to natural disasters or theft. Home warranties do not cover these types of damages.

Homeowners’ insurance is mandatory to acquire a mortgage. You can purchase both homeowners’ insurance and home warranty coverage to ensure maximum protection of your home.

How much does a 1 year home warranty cost?

On average, the annual cost of a home warranty’s basic coverage can lie anywhere between $350-$700. There are other factors that can increase the cost like, the optional coverage, size of your home, the plan you choose, etc.

How much does a seller’s home warranty cost?

The cost of a seller’s home warranty is usually the same as a standard home warranty but it can also be more expensive. The average annual premium being $350-$700 and the monthly cost ranging from $25-$50. Sellers usually equip the home they are selling with a home warranty to increase its market value and incentivize potential buyers.

Will the cost of a home warranty be higher if I have an older home?

The cost of a home warranty does not increase if the property is old. Home warranty companies offer coverage to older homes and some even cover items with pre-existing conditions. It is wise to obtain a home warranty policy if you have an older home. Appliances and systems are more prone to break down as they age.

How do I decide If a home warranty is worth It?

Evaluate why you need a home warranty. If you’re a property owner interested in reducing maintenance expenses or a real estate agent/ home buyer/home seller looking to reduce maintenance liability, a home warranty may be worth it.

Home warranties are also a wise choice if you own an older home and are concerned about appliance or system failure. The final factor to consider when deciding whether a home warranty is worth it is to simply calculate the cost of a home warranty, and the repair or replacement cost of your home appliances. You can make your decision based on the amount of money you are willing to spend.

Do I need a home inspection before purchasing coverage?

No, most home warranty companies do not require you to have your home inspected, but it would be beneficial to do so. It would serve as a testament to the condition of your home’s appliances and systems and whether they have any pre-existing conditions. It can make your purchase and claims process easier.

How much should I pay for a home warranty?

The cost of your home warranty should be in line with the coverage you want. If you are looking to cover only a few items that are old, you should consider a basic plan. Basic plans are considerably less expensive than other plans.

If you are seeking to have comprehensive coverage to ensure complete protection of your home, you should choose enhanced coverage options. Comprehensive plans can be expensive. Feel free to request price quotes on homewarrantyreviews.com to help you compare costs and make your decision.

Is there a limit to the number of repairs during my contract term?

Most home warranties do not put a limit on the number of repairs you can claim during your contract period. You can file a claim whenever a covered item breaks down or fails during the coverage period. You are charged a trade call fee for each service call visit made by a technician.

Can you buy a home warranty at any time?

Yes, you can buy a home warranty whenever you want. Your home warranty coverage starts after 30 days waiting period. You will receive an entire year of service if you choose to pay the annual premium. It is advisable to purchase a home warranty after the expiration of a manufacturer’s warranty.

Top home warranty Companies

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