Owning a home can be expensive. Between monthly bills, property taxes, and the various repairs that may be necessary, it can be challenging to budget for emergencies and other big-ticket items that may be required. In these situations, a home warranty can be valuable.
A home warranty is a service contract that helps homeowners cover the costs of repairs on home systems and appliances, such as furnaces, washers and dryers, and central air conditioning units, that may break down unexpectedly. Typically offered as an incentive by sellers to buyers in a home sale transaction, homeowners can also purchase home warranties to cover their home. They can be an important way to guard against the high costs of home ownership and serve as a form of insurance.
Jump to a section:
- What Does a Home Warranty Cover?
- Best Home Warranty Companies
- How Much Does a Home Warranty Cost?
- Do You Need a Home Warranty?
- What to Look for in a Home Warranty Company
What Does a Home Warranty Cover?
While a home warranty may seem like insurance, it is not homeowners insurance. It does not cover your home’s structure or belongings in the event of a fire, storm, flood, or other accident. Instead, it covers repairs and replacements on systems and appliances due to normal wear and tear. To be covered under a home warranty, there does not need to be any sort of major catastrophe—an appliance or system can simply break down.
Generally, home warranties cover electrical systems, plumbing systems, HVAC and air equipment, washers and dryers, and kitchen equipement such as the refrigerator, oven, and dishwasher. However, there are different types of home warranties, and coverage may vary based on the area and the specific contract. For example, less expensive home warranties may only cover appliances, while more expensive home warranties will cover both appliances and systems. Typically, these contracts will last for a set period of time, such as one or two years.
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Home Warranty Expert for ReviewHomeWarranties.com
Home warranty coverage may include home systems, such as air conditioning, heating, plumbing, and electrical, and/or home appliances, such as washer and dryer, refrigerator, oven, dishwasher, garbage disposal, and many other items.
In every particular case, the coverage depends on the home warranty plan purchased by the customer. Some plans include only basic coverage for one or two home systems and a limited number of appliances. More comprehensive plans may include all home systems and an extended list of appliances.
There are plans for systems only or appliances only. Most home warranty companies also offer optional items, like swimming pools and spas, that are priced a la carte and may be added to any plan.
To answer this question, we have conducted research based on 34 companies, 274 home warranty plans, and 14,053 different plan variations. We found that the average cost of a home warranty policy is $616 with a range from less than $49 for very limited coverage to over $2,400 for comprehensive coverage.
To explain such a large range, we considered several variables that could affect the cost of a home warranty plan. These included the state, plan type, term, deductible, house age, and house type.
Best Home Warranty Companies
While there are numerous home warranty plans out there, some offer more benefits than others. Here are five of the best home warranty companies often used by consumers.
- AFC Home Club
- America’s Preferred Home Warranty, Inc.
- Complete Protection
- American Home Shield
- Select Home Warranty
AFC Home Club
- Established in 2009, America’s First Choice (AFC) Home Club offers easy online quotes while requesting minimal personal information.
- The company offers a number of flexible plan options, including platinum for full coverage, gold, silver, and a plan for just your home systems.
- “Club Benefits” include discounts on restaurants, retailers, and online stores.
- 30-day waiting period before you are eligible for a service request.
- No limits on the number of service requests.
- It has a “B” rating from the Better Business Bureau.
America’s Preferred Home Warranty, Inc.
- America’s Preferred Home Warranty, Inc. is a good option for anyone on a budget, with three different choices for deductibles: $50, $100, or $125.
- Warranty plans available for condominiums, townhouses, new construction homes, single family houses, and multi-family units.
- Coverage varies, but it generally includes most mechanical systems and appliances.
- Operating since 1999 and is based out of Jackson, Michigan.
- Complete Protection offers a range of plan and payment options to fit every budget. Premiums range from $32 per month to $720 annually, with no deductible.
- The company pays for preventative maintenance and all appliance parts and allows users to choose their own repair service technicians.
- The plans include a kitchen and laundry plan, a heating/cooling plan, basic built-ins, full house, or full-house plus.
American Home Shield
- Established in 1971, American Home Shield is one of the oldest and most respected home warranty companies in the United States.
- The company offers plans with premiums ranging from $29.99 to $34.99 per month, with deductibles from $75 to $125.
- Plans include an appliances plan, systems plan, and combination plan. In addition, American Home Shield will allow users to build their own plan with the systems and appliances that are most important to them.
Select Home Warranty
- Unlike many other home warranty companies, Select Home Warranty contracts are available nationwide.
- Premiums range from $429 to $499 per year, with a $75 deductible. Service fees are $75.
- With Select Home Warranty, there are three plans available: platinum, gold, and bronze.
How Much Does a Home Warranty Cost?
The cost of a home warranty varies significantly based on the type of coverage and the area of the country where it is purchased. As a general rule, the higher the level of coverage, the more expensive the warranty will be.
The best home warranties start as low as $200 per year for a policy that just covers appliances and can exceed $800 annually for a more comprehensive plan. A homeowner can add extra coverage to the contract, such as coverage for a swimming pool or external well. Each addition will add to the cost of the warranty.
While homeowners can purchase a warranty at any time, the best deals are often found during a real estate transaction. Sellers of home warranties often offer the lowest prices and most comprehensive coverage at this time. At the end of the first year, the homeowners generally have the option to renew the plan.
Do You Need a Home Warranty?
Home warranties are often touted as a selling point when a house is on the market. They can be a way to give buyers peace of mind, knowing that if something goes wrong, it will be covered by the warranty. But do homeowners actually need a home warranty?
Homeowners with newer homes probably do not need a home warranty. There is a chance that you may already have coverage for your appliances and systems under their warranties, or if your house is newer, through your builder. For these homeowners, the cost of a warranty—which will probably be $350 to $500 a year, plus $50 to $75 for each service call—will not be worth it.
However, for homeowners with older homes, a home warranty may make good sense. If you have older or outdated appliances and systems, the investment in a home warranty may be smart if you think that you will spend much more than that on repairs given the age of your home.
Ask the Expert
Associate Broker at Keller Williams Advantage
I always recommend home warranties to my clients, especially my buyers. A typical one-year home warranty policy in my area costs between $400 and $600, and they cover most mechanical items (furnace, water heater, air conditioning unit, etc.) and appliances in a house.
I feel it’s very important for a first-time homebuyer to get a warranty to help with any unexpected issues that might arise after they move into their new home. On the seller side, many people aren’t aware of this but there are warranty companies that will cover the home during the listing period.
For example, if a dishwasher stops working during the time a house is on the market, or while it’s under contract but before closing, the warranty company will step in and cover the repair for the sellers. This can be very useful to a seller while they’re selling their home.
There are many home warranty companies out there, but there is one company that I like to work with because they allow my clients to hire their own contractor versus having to use a contractor of the warranty company’s choosing.
This is important to me because the client is in control of who to hire and they can get recommendations from myself or friends and family, so that they can ultimately hire a contractor that they trust.
The warranty company will then speak to the contractor, diagnose the issue, talk about coverage, and then reimburse the client for the repair costs.
What to Look for in a Home Warranty Company
There are several important things to consider when trying to find the best home warranty company. Here they are:
- First and most important factor is whether coverage is provided in your area, as not all home warranty companies are authorized in your state. Once you have established that the company is licensed in your state, take a look at these other issues.
- Second, ask about how the warranty works. Can you choose a repair person yourself, or are you required to work with one selected by the warranty company? Is there a service fee or deductible for work performed under the warranty? If so, how much is it? These factors will impact the overall cost of the warranty, so it is important to know this before choosing a company.
- Third, ask about what is and is not covered with each company and each plan that you are considering. If you have something in your house that you need to be covered, such as an expensive sprinkler system, be sure that it will be covered before you commit to a company.
- Fourth, ask about exclusions and/or how your claim could be denied. Does the company have any policies, such as denying claims for improper installation or code violations? If so, learning about it now will help make sure that you make a smart choice.
While home warranties are not the best option for every homeowner, they can help to reduce the costs associated with repairs that are necessary for home appliances and systems. Whether you get a home warranty after purchasing a house or are in the market for a warranty for your existing home, be sure to think carefully about the advantages and disadvantages of these warranties before signing a contract.