How Much Does A Home Warranty Cost And Is It Worth It?

If something goes wrong with a home appliance or system in your house, how will you take care of the costs? It can cost thousands of dollars to replace your HVAC or electrical system.

Home warranties can cushion the blow – if something goes wrong, a warranty plan covers your cost, similar to how insurance works. But, what is a home warranty, the average home warranty cost and how does a home warranty work?

We'll help you understand how a home warranty can give you peace of mind and whether a home warranty fits your needs. We'll also look at a few reputable home warranty companies from which you can consider purchasing a plan.

How Does A Home Warranty Work?

A home warranty is an option that offers discounted repair and replacement services for household appliances or home systems. Not all home warranties are the same, and coverage also varies depending on the warranty you purchase.

Appliances covered by your home warranty can include washers and dryers, refrigerators and other kitchen appliances, furnaces, plumbing systems, electrical systems and more. The individual offerings depend on individual companies and plans.

When something breaks and you have a home warranty, you file a claim to have it fixed or replaced. You may have to pay a service fee before your home warranty covers the rest of your claim. Once you file a claim, a third-party provider will look at your appliance to determine the problem and schedule a repair or replacement.

A home warranty typically covers your home for up to 1 year. After that point, you can decide whether to renew your warranty or decline further coverage.

Home warranties are similar to insurance policies in that you file a claim. Insurance companies and home warranty companies review a claim and, if approved, cover the bill, minus the deductible or service fee.

However, if you're looking at how a home warranty compares to home insurance, they are not exactly the same. For example, a home warranty is optional, unlike homeowners insurance, which is required if you have a mortgage. In addition, homeowners insurance covers losses and damage to your property if an event or disaster occurs to your home, such as fire or a weather hazard, but a home warranty does not.

What Factors Into The Home Warranty Cost?

How much does a home warranty cost? Certain factors affect homeowners' costs, and home warranty companies calculate these factors to determine your premium and service fees. Your type of coverage and home size also combine to determine how much you'll pay a home warranty company.

Premium

Similar to an insurance company, you'll pay what's called a "premium" every month for coverage. If the home warranty wasn’t part of the home’s purchase agreement, the home warranty premium covers the purchase amount for the plan you choose, usually in monthly and yearly premiums. You'll also pay for a service call fee when you call the warranty company for service.

• Monthly: You can pay a home warranty every month. The average basic home warranty contract costs about $25 – $50 each month.
• Yearly: Home warranties renew annually (often in 1- to 3-year plans), and you may receive additional coverage when you opt to pay for the full year. The annual average costs between $300 – $600 per year.

Most companies enforce a grace period before you can get coverage for your home warranty, such as 30 days.

Type Of Coverage

The type of coverage and the home warranty company you choose also factor into calculating the cost of a home warranty. If you select specific add-on coverages for your home warranty, you may pay more than you would if you just select a basic coverage.

Service Fee

As mentioned, the service fee is like a deductible for your home warranty policy, which you pay every time you file a claim. If something minor breaks and the repair doesn't cost much, you pay the smaller amount – either the fee or the repair. You can expect to pay between $60 – $100 per trip in service fees or deductibles.

Home Size

Home size and where you live may also factor into the cost of a home warranty. Generally, home size won't affect your costs unless your home exceeds 5,000 square feet. Read the fine print in your policy to ensure that your home is covered or ask the company directly to explain how your home size will factor in your costs.

Average Cost Of A Home Warranty

The average cost of a home warranty is around $600 per year, or around $50 per month, and can save homeowners money when an appliance or system breaks down. The cost depends on the company and the plan level. It can be as low as $275 or as high as $1,425.

How Much Does A Home Warranty Cost From The Best Company Plans?

As you might imagine, home warranty costs differ depending on the company you choose. We've compiled a list of the best home warranty companies and how much their home warranty plans typically cost. We'll look at AFC Home Club, American Home Shield and Choice Home Warranty.

AFC Home Club

AFC Home Club allows you to choose your technician for repairs as long as they are a licensed, insured technician. If a repair fails, AFC Home Club will send a contractor back to your house at no cost. The company also offers a 24/7 in-house service team and member benefits, such as discounts on home security, insurance, electronics coverage and more. The company offers the following home warranty plans:

• The Systems Plan: The Systems Plan covers up to six systems, including heating and cooling, plumbing and electrical systems.
• The Silver Plan: The Silver Plan covers up to nine appliances, including kitchen and laundry appliances and garage door openers.
• The Gold Plan: The Gold Plan covers up to 15 appliances and systems, including heating and cooling, kitchen and laundry appliances, plumbing and electrical.
• The Platinum Plan: The Platinum Plan covers up to 18 appliances and systems, including heating and cooling, kitchen and laundry appliances, plumbing, electrical, ceiling, exhaust, attic fans and more.

You must type in your home address to learn about warranty plan costs and the differences in cost between each plan.

American Home Shield

American Home Shield offers exclusive home services to members, including rekeying up to six keyholes with four identical keys for a low fee, HVAC tuneups, a professional to install plumbing items and tech installation and support. The company offers the following plans:

• ShieldSilver™: ShieldSilver covers heating and air conditioning, electrical and plumbing systems, discounted home maintenance services and up to $5,000 for heating and air conditioning systems.
• ShieldGold™: ShieldGold covers heating and air conditioning, electrical and plumbing systems, discounted home maintenance services, up to $5,000 for heating and air conditioning systems, kitchen and laundry appliances and up to $2,000 per appliance for repair or replacement.
• ShieldPlatinum™: ShieldPlatinum covers heating and air conditioning, electrical and plumbing systems, discounted home maintenance services, up to $5,000 for heating and air conditioning systems, kitchen and laundry appliances, up to $4,000 per appliance for repair or replacement, roof leak repairs (up to $1,000), up to $250 in coverage for code violations and permits, free HVAC tuneup, unlimited air conditioning refrigerant and coverage for code violations, permits and modifications.

You can get the premium for American Home Shield by entering your home address, email and phone number. American Home Shield offers three deductible levels: $75, $100 and $125.

Choice Home Warranty

Choice Home Warranty offers trusted technicians to repair your home systems and appliances with availability 24 hours a day, 7 days a week. It offers two plans, including the following:

• The Total Plan: The Total Plan costs $50 per month. It includes the following covered items: air conditioning, heating, electrical, plumbing, plumbing stoppage, water heater, whirlpool bathtub, refrigerator, oven/range/stove, cooktop, dishwasher, built-in microwave, garbage disposal, washer and dryer, ductwork, garage door opener and ceiling and exhaust fans.
• The Basic Plan: The Basic Plan costs $44 per month. The Basic Plan offers the same covered items with the exception of covering the air conditioning system, refrigerator, washer and dryer.

The company also offers optional coverage for pools, spas, well pumps, sump pumps, central vacuums, limited roof leaks, septic systems, second refrigerators, standalone freezers and septic tank pumping.

Which home warranty company makes sense for you? It's worth considering each plan side by side, optional coverages and other factors before you make a final decision. Then, compare each plan against other companies to determine whether they fit your budget and goals.

Ways To Save Money On Home Warranty Costs

Homeowners can save money on home warranty costs by taking a few basic approaches, including choosing a basic plan, requesting multiple quotes and asking about discounts. Let's take a look at each approach.

• Choose a basic plan: Choosing a basic home warranty plan can help homeowners save money on home warranty costs because the basic plan still offers coverage, but not as comprehensive as a more robust plan. It's usually cheaper to choose the basic plan.
• Request multiple quotes: Requesting quotes on home warranty plans from different companies can help you save on home warranty costs. Doing so allows you to compare and contrast your options.
• Ask about discounts: Asking about home warranty discounts can help you save money on home warranty costs. For example, AARP members can get a discount for joining American Home Shield.

How To Determine Whether Buying A Home Warranty Is Right For You

A home warranty can be worth it for homeowners in specific situations, such as owning a fixer-upper, aging appliances, having a limited budget or something similar. Knowing this kind of information can help you determine whether a home warranty is a good investment.

FAQs On Home Warranty Costs

Let's take a look at a few frequently asked questions about home warranty costs to help you make a final decision about whether a home warranty is right for you.

What does a home warranty cover?

You may assume that a home warranty covers just kitchen appliances and other home systems, but you may be surprised.

A home warranty can cover these types of systems:

• Electrical
• Heating
• Water heaters
• Plumbing
• Air conditioning
• Smoke detectors
• Duct
• Water dispensers

These systems correspond to the following appliances:

• Refrigerators
• Garbage disposals
• Dishwashers
• Ranges and ovens
• Garage door openers
• Washers and dryers
• Trash compactors

Learn more about the lifespan of kitchen appliances. 

It's also important to note what it doesn't cover: structural issues in your home, commercial equipment, preexisting conditions, wear and tear on the house, rust, defective previous repairs, asbestos, radon gas, mold and building and zoning violations. If you have specific items on your property that you want covered, it's a good idea to ask the companies you're considering whether they cover them.

What are the average savings with a home warranty?

The average savings depends on a wide number of factors, including the type of appliance requiring repair, the company you choose, your service fees and more.

Ultimately, you can spend hundreds of dollars to thousands of dollars to replace a home system or large appliance without the benefit of a home warranty, whereas you could pay just $25 – $50 each month for a home warranty.

For example, let's say your refrigerator breaks and it will cost $1,500 to replace. If you paid $50 per month for your home warranty, you'll pay less – $600 – to your warranty company in the span of 1 year. A system such as a furnace can cost more than $6,000 to replace without a warranty. You'll pay far less for a home warranty than a home system or large appliance.

How much does a home warranty cost per month?

The average cost of a home warranty breaks down to around $600 per year, or around $50 per month, though the full cost depends on the company you choose and the plan level you pick. It can end up as low as $275 or as high as $1,425 and also depends on the add-ons you incorporate.

Note that a home warranty may not make sense for a home with brand-new appliances because appliances are less likely to break down. Furthermore, you'll likely pay between $60 – $100 per fix in service fees.

Who pays for the home warranty: the buyer or seller?

The buyer or the seller may purchase a home warranty. Sellers may consider purchasing a home warranty to make it attractive for a buyer. A potential buyer can feel more confident in their decision, and a seller may get more money for the home more quickly. It may also allow your home to sell without an inspection, which could uncover issues with the home.

In many cases, sellers include a 1-year home warranty with the sale of the house, and the buyer does not have to pay anything for the coverage, though they will pay service fees and deductibles if a claim is made.

As the buyer, you may want to pay the home warranty because the seller may not choose the type of coverage you want, meaning you get coverage gaps. You may also be able to get the seller to purchase a more comprehensive home warranty coverage and negotiate to get the preferred plan in closing costs. Home buyers can shop around and look among various plans to find the right option.

The Bottom Line: Paying For Home Warranty Coverage Offers Peace Of Mind

The average cost of a home warranty is around $600 per year, or around $50 per month.

If you're looking for peace of mind, a home warranty offers a repair and replacement solution for household appliances or home systems. The cost of home warranty coverage depends on a number of factors, including your premium, type of coverage, service fees and home size.

You can save money on home warranty costs by choosing a basic plan, requesting multiple quotes and asking about discounts. Note that it might not make sense to purchase a home warranty in certain circumstances, such as if you purchase a brand new home. It may seem difficult to "pull" extra cash out of your pocket when you're trying to come up with a down payment. However, like insurance, it can save you thousands because you may not have to replace a complete, expensive appliance or home system.

Ready to buy a house? Start the approval process with Rocket Mortgage^® today to purchase a home.