Homeowners realize over time the costs of owning a house when certain things start to break and either need to be fixed or replaced. As with many things in life that cost money, a question that may arise is how to handle it and whether or not an extended warranty makes sense. How much do home warranties cost and are they worth the price?
Depending on the extent of coverage you can pay from $29 – $60 per month or $348 – $720 per year for a home warranty. You should expect to additionally pay $60 – $125 per service call when you make a claim for a service tech to visit your home.
Homeowner warranty vs homeowner’s insurance vs manufacturer’s warranty
It’s important to understand the difference between a homeowner warranty, homeowner’s insurance and manufacturer’s warranty.
Homeowner warranty
A homeowner warranty is a separate paid policy that protects certain items in your home such as major appliances and systems and is voluntary.
A homeowner warranty varies in price depending on what coverage you choose but you can expect to pay $29 – $60 per month for a warranty depending on what coverage you choose. Home warranty companies usually also charge you a service fee ranging from $60 – $125 per claim when a service technician visits your home so there is a direct cost every time you make a claim.
Homeowner insurance
Home insurance protects your house against various perils such as fire, theft, vandalism, hail damage and things of that nature and is often mandatory. It’s generally mandatory especially if you have a mortgage but it should be considered a must have regardless. It protects your biggest investment against the unexpected.
A homeowner insurance policy generally costs around $35/month for every $100,000 value of your home. So if your home is worth $300,000 you may pay around $105/month or $1,260 per year.
Manufacturer’s warranty
The manufacturer’s warranty generally covers a specific appliance and will cover the breakage of a specific part during a specified period, typically up to 1 year. It may or may not include the cost of labor and parts. In the case of a large appliance like a washer or dryer, they will typically send a service tech to your home to assess and fix the problem. In the instance where the appliance is smaller, they may require you to deliver it directly to them for repair perhaps at your cost.
A manufacturer’s warranty is included as part of the purchase of the product at no extra charge although some companies may offer additional coverage at an extra charge.
You can choose to take a homeowner warranty whereas a home insurance policy should be a given to protect your biggest investment. A lender wants to know that you have protected their investment – your home – since they are lending you the money to buy it.
What is actually covered with a home warranty?
Depending on the insurer, you will find a wide variety of options to protect various aspects of your home. Generally you will find home warranties that cover Appliances, Systems and Combination plans which combine both types. You can also choose Other coverage for additional parts of your home that you may have.
| Appliances | Systems | Combination | Other |
| $430 – $720/year | $312 – $400/year | $400 – $700/year | Often you can choose 3 – 4 Other options as part of your policy. |
| Washing Machine | Air Conditioner | Washing Machine | Second Appliances |
| Clothes Dryer | Heating System | Clothes Dryer | Ice Maker |
| Refrigerator | Electrical System | Refrigerator | Central Vacuum |
| Built In Microwave | Plumbing System | Built In Microwave | Standalone Freezer |
| Dishwasher | Plumbing Stoppages | Dishwasher | Septic System |
| Garbage Disposal | Water Heater | Garbage Disposal | Water Softener |
| Oven/Range/Stove | Whirlpool Bathtub | Oven/Range/Stove | Tankless Water Heater |
| Cooktop | Air Ducts | Cooktop | Well Pump |
| Ceiling & Exhaust Fans | Ceiling & Exhaust Fans | Sump Pump | |
| Garage Door Openers | Roof Coverage | ||
| Air Conditioning | Pool | ||
| Heating System | Spa | ||
| Electrical System | Salt Water Pool System | ||
| Plumbing System | Sprinkler System | ||
| Water Heater | Pump System | ||
| Whirlpool Bath | Gutter Cleaning | ||
| Air Ducts | Floor/Carpet Cleaning |
Read the small print
What exactly are you covered for with a home warranty and what isn’t covered? The devil is in the details as they say. Some insurers allow you to add on several options from the Other column at no extra charge. Some may charge extra for this coverage.
Some even offer services such as gutter cleaning which is more of a maintenance item but still costs money if you hire someone to do it and is part of the important aspect of moving water away from your foundation.
I once bought a used car that came with a 1 year warranty as standard. About 8 months into ownership I noticed a leak on my driveway and when I took the car in for service, discovered that it had a leak in the coolant bypass valve area. And of course it was one of the things not covered by the warranty so I had to pay for the repair myself to the tune of just over $1,000.
What separates one home warranty from another
Depending on your specific warranty insurer and their terms, there are a number of things to think about before you sign up.
Monthly fee: How much does it cost and can you afford it? Is it worth it?
Service fees: These can add up if you have to make multiple claims. If your service fee is $100 and the repair is $50, you’re actually paying more for the service fee than the actual fix.
Deductible: Is there a deductible that you will pay for each repair?
Cancellation: A warranty is typically for one year at a time and can be renewed. At that point, does it go month to month or are you locked in for another year? Some companies offer 3 or 5 year plans for larger savings in exchange for a longer commitment from you.
Inclusions and exclusions: Ensure you understand exactly what sort of claims are allowed and which will be turned down. I had a one year car warranty but when I made a claim it was excluded. See below for more info. The same thing may happen with a home warranty.
Repair or replacement: Some insurers may agree to only replace certain things rather than replacing them whenever possible.
Replacement brands: Will the warranty company replace an appliance with the same brand or will they choose a cheaper one that you didn’t select?
Service repair choice: Do you have a choice as to who does the repair or will the warranty company choose for you?
Speed of response: You should expect service within 48 hours – 72 hours at the latest. But how quickly will a service repair technician show up if it’s an emergency like a broken furnace in January? If it’s an urgent repair but you can’t wait and call someone yourself, will the warranty pay? Probably not.
Expedited service: Since you’re paying for this warranty, can you find a provider who offers expedited service that will (for example) provide quicker response times for an emergency or holiday service? Having called a furnace repair company three times in winter including twice on statutory holidays – and having to pay double time for those incidents – I can speak about the value of getting a broken heating system fixed quickly.
Availability: Not all home warranty insurers do business in all states or areas! Check to see that the warranty company you’re thinking about offers service in your home area especially if you’re remote.
Questions to ask before you purchase a specific home warranty plan
- How old are your appliances and systems? The older, the more likely you will need replacement or repair. If they are more than half way through their expected lifespan, a 50% repair cost usually means replacement is better. Check this article to learn more about whether to Replace or Repair An Appliance.
- Do you need a home inspection before the warranty is active? Some warranty companies may want to know the current state of your home before they agree to cover it.
- What are the replacement cost limits for each covered item? If your fridge costs $2,000 to replace but the maximum replacement value is $1,700 you’ll have to pay $300 out of pocket to get the same fridge or buy a cheaper replacement.
- Does the warranty cover pre-existing conditions? If you have an appliance or system with a known, existing problem will it be covered?
- Can the insurer turn you down if your home and appliances are a certain age? The older the things to be insured, the more likely the insurer will have to pay out.
- How long is the waiting period? It’s not unusual to have to wait 30 days before being able to make a claim so you can’t purchase a plan and make a claim one day later.
- Do you get to choose your own service provider should you make a claim or does the insurer decide?
- Is there a service fee every time you make a claim and if so how much? Often you pay a service fee when you make a claim which is on top of the monthly insurance fee itself. Think of it as a deductible. This ensures that people don’t make frivolous claims but it means you do pay a fee each time you make a claim. Expect to pay $60 – $120 per service call on top of your monthly warranty fee.
- If a repair takes several visits, do you pay a service fee each time? Or do you just pay for the first visit?
- Guarantee: What sort of guarantee do you get on the work in case the appliance breaks again? I had the ignitor on my furnace break in two consecutive Januaries and the only thing that was covered by warranty the second time was the $30 ignitor part but not the $150 in labor.
Questions to ask yourself before your purchase a home warranty plan
- Are you handy? How much work can you do yourself and are you motivated to do some minor repairs and maintenance here and there?
- How old is your home? The older the home the more things might go potentially wrong.
- Is anything still under warranty? If you bought a brand new house, the home will have various warranties in place that may last up to several years in the case of foundation and things of that nature. Appliances will typically have 1 year warranty to start with. Being over insured is a waste of money.
- How difficult is it to find good quality service in your area?
- What do you own and what is rented? Some water heaters and water softeners are rentals which means your supplier is responsible for replacing each as part of your lease contract.
My personal experience with home repairs and replacements
Having owned 3 houses and 3 condos in my lifetime, I have had to organize various fixes and replacements including:
- A leaking roof (twice actually including in a new house)
- Roof insulation replacement
- Three furnace breakdowns
- A clogged water softener
- A switch to low flow toilets
- Replacement of worn out appliances including two dishwashers, a stackable washing machine and dryer and an electric garage door opener.
- Installation of a small inground concrete brick garden in front of our house.
If you click on each link, you can see which of these fixes I did myself and which ones I paid someone else to do. If you’re handy you can do some things yourself. But in other cases you are better off getting a pro to handle it especially for major projects such as reshingling a roof and replacing insulation.
I’ve also done various other things around the house that an average person can easily do such as replace furnace filters, clean the dishwasher filter and rinse the kitchen range hood filter.
While some minor maintenance activities and repairs around the house can be done by most people, as soon as you get into appliance repair, furnace repair and anything to do with your roof or insulation, you really need to contact a pro. In that regard a home warranty could act as an insurance policy to help defray the cost of a large repair in the future.
Final thoughts on home warranties
Most appliances come with a 1 year warranty but it’s usually limited to covering things that are the fault of the manufacturer, not wear and tear or your mistreatment of the appliance. If you need to make a warranty claim or feel you do, make sure it’s within the time frame to avoid missing the end of the warranty. A home warranty offers extra protection at a cost that may suit you depending on the replacement or repair costs you might otherwise have to pay yourself.
Do an inventory of appliances in your home, their replacement cost, their age and when they are likely to require replacement. You can check to see the cost to repair vs replace appliances and when you can expect to have to make such a decision. While you want to be insured and protected, you don’t want to be over insured and waste money on coverage you don’t need.