How Much Is A Home Warranty?
You've heard the horror stories: The air conditioning bites the dust on the hottest day of the summer. (I've been there and I definitely don't recommend it.) Or the opposite happens and the heating system is on the fritz as the chilly weather settles in. And no matter what time of year, having a faulty water heater is never an ideal situation. (I'm definitely about that steamy shower life.) Our homes are vulnerable to the whims of wear and tear, and the repair bills that result can be a nightmare for homeowner budgets.
Home warranty plans can help you deal with the covered repair costs for systems and appliances - they're there to settle the storm. Naturally, you want to know how much these plans cost - as well as what kind of repairs and replacements the warranties cover. Unexpected repair bills may be scary, but - in financially savvy homeowner fashion - you still want to feel confident that you're going to benefit from the investment.
Here's what you should know about buying a home warranty:
First up: Home warranty 101
Before we get into the costs, let's make sure we're all on the same page about what we're buying. For starters, you can use home warranty and home repair plan interchangeably. However, you can't do the same with home insurance. Home warranties and repair plans are sometimes lumped under the homeowners insurance umbrella, but they are very much separate entities.
Insurance typically covers accidental damage from unfortunate circumstances like theft, storms, fires and natural disasters. The coverage generally includes the interior and exterior of your home as well as personal property and liability for injuries that occur on your property. By contrast, home repair plans are service contracts that cover damage to systems and appliances due to normal wear and tear. Depending on the plan, this can include major appliances such as washers and dryers, refrigerators, ovens, dishwashers, cooling units, furnaces and water heaters. Some also cover the main systems, including heating and cooling, electrical and plumbing.
The other distinguishing factor between home insurance and warranty plans is that banks typically require homeowners to have an insurance policy when applying for a mortgage. Home warranties are optional for homeowners who want the additional coverage for unexpected breakdowns and maintenance needs.
When you have a home repair plan, your life can be simpler when something goes wrong with your covered systems or appliances. Simply call your provider and they'll handle the arrangements, connecting you with a qualified contractor to make the repair. That's right - you no longer have to go through the hassle of finding a trustworthy service professional or worrying if the one you choose is going to rip you off.
Damage and breakdowns are inevitable when you use your systems and appliances day in and day out. A home repair plan offers you the peace of mind that when unexpected issues and emergencies happen, you'll have help every step of the way until the problem is fixed.
How much does the average home warranty cost?
Now that we're well acquainted with home repair plans, we can talk numbers. The average home warranty cost is between $200 and $600 for a year of coverage. However, plans that cover only appliances can even be under $100. Most home warranty providers will give you the option to pay for the entire plan at one time or split the cost into a low monthly payment.
There are several reasons for the range in average cost, including variations between providers, plans and state laws. The type of coverage, for instance, will affect your final cost. A homeowner that chooses to cover just their HVAC system will generally pay less than those who select multi-system coverage. Combo plans and bundles can also offer homeowners more complete coverage at a cheaper cost than buying multiple separate plans.
Home warranty companies may also run special offers or discount policies. These sale prices are generally paid a year in advance. When the discount expires, your plan will renew at the normal price. Your purchase time can also influence the cost. If you plan on moving in the near future, for example, you're in luck. Realtor.com advised homeowners to purchase coverage at the time of the real estate transaction to get the best deal on comprehensive repair plans.
Are there extra fees and add-ons?
Keep in mind that while price tags ameliorated by home warranties will be far less than paying for repair bills entirely out of pocket, you may still need to account for additional fees. For instance, some plans may require homeowners to pay service-call fees when contractors complete repair work. These typically range from $60 to $125 depending on the project, according to estimates from Consumer Reports. Other potential expenses include disposal fees or sales tax on new equipment.
You may also encounter out-of-pocket fees when major repair or replacement costs exceed the provider's maximum amount of coverage. For instance, a common caveat is that homeowners can receive up to $10,000 in total annual coverage. Some companies may also cap how much of that maximum coverage can be applied to each system.
These fees will vary by provider, so it's always important to inquire about potential out-of-pocket costs and coverage limitations before signing on the dotted line. In fact, The Balance suggested asking to view sample copies of the policy options you're considering before committing to any home repair plan.
As far as add-ons go, many home warranty companies will offer optional policy additions to expand the coverage beyond basic packages. Money Crashers highlighted common add-ons and the associated average cost added to the monthly payment, such as:
- Pools and in-ground hot tubs: $10 to $15.
- Guest units: $10 to $20.
- Septic pump: $2 to $5.
- Well-water pump: $10 to $20.
- Lawn sprinkler system: $5 to $10.
Some combination or premium plans will already include this kind of add-on coverage, but the total cost of the warranty will come at a higher price. Depending on the coverage you need, it may be more cost-effective to purchase a lower-priced plan and select the add-ons that are most relevant to your home.
What kind of coverage do you get for your money?
You generally have a few options when determining what kind of home warranty coverage is right for your needs. The usual options include:
- Plans for specific or multiple systems.
- Plans for specific or multiple appliances.
- Comprehensive plans for systems and appliances.
Home repair plans may include support for maintenance, breakdowns, repairs and replacements for the covered systems and appliances. For instance, a home warranty that covers electrical systems applies to issues like wiring breakdowns, short circuiting, power outages and electrical surges. Plumbing plans cover problems with pipes and sewer lines, such as broken pipes, clogged drains and leaks. Warranties for your HVAC system will cover repair and replacement work for circuit boards, fuses, breakers, condensers, motors, fans, controls, valves, burners and other system parts. Plans for major appliances generally apply to normal wear and tear on refrigerators, dishwashers, ranges, ovens and cooktops, built-in microwaves, washers and dryers, garbage disposals and garage-door openers. It's important that you check the Terms and Conditions of your plan(s) for full details.
The most complete plans will cover all systems and appliances, although most providers will offer various combinations to meet your coverage preferences.
While some home warranty plans may offer add-on options to compensate, common coverage exclusions include outdoor items like sprinklers or pools, permit fees, haul-aways and small appliances like humidifiers or window air conditioning units. Some policies may cover the refrigerator but exclude the ice maker, or apply to the hot water heater but not the tank itself. There may also be restrictions surrounding the cause of the issue, such as plumbing blockages due to tree roots or oven breakdowns when the appliance is in self-cleaning mode. The limitations of the warranty won't always be obvious, so be sure to review the policy coverage exclusions before choosing a plan.
Why should you buy a home warranty?
The ultimate question is whether the annual cost of the home warranty is a worthwhile purchase in the special case of your abode. There are several reasons why a home warranty plan is a beneficial investment, with peace of mind topping the list for many homeowners. When you have a home repair plan, you don't have to stall repairs because of financial restraints or worries about which service providers to trust. This can also be especially calming for not-so-handy homeowners who don't have the skills, knowledge or desire to tackle repair or replacement projects on their own.
What's more, having a home repair plan allows you to be as prepared as possible for unexpected and emergency issues typically not covered by your insurance, local utility company or city. When the worst happens, you'll have lower out-of-pocket expenses on covered repairs - and your provider can facilitate a speedy fix. This is a major perk when it comes to those aforementioned horror stories, ensuring you get back to comfortable living as soon as possible.
When it's time to sell, home buyers are likely to view a warranty as a major positive. Realtor.com noted that many home sellers offer a pre-paid year of coverage as an additional incentive. As buyers are often wary of surprise repairs when moving into a pre-owned home, offering the repair plan can ease their concerns and convince them to make a quicker buying decision. The warranty will also help you out before the buyers are even in the picture, helping you cover the costs of the necessary repairs to get your home ready for the market.
From a financial perspective, a home warranty is a smart way to budget for unexpected home repairs. You can plan for the consistent annual or monthly payment, and the coverage means you won't be hit with surprise bills when issues arise. As a result, many homeowners find that spending money on a home warranty plan can actually turn into savings.
Ultimately, home warranty plans can help eliminate the stress that comes with finding a contractor, getting multiple bids and paying the final bill. For many homeowners, this assurance is well worth the few hundred dollars.
What should you consider before you buy a warranty?
When you're on the hunt for the right home repair plan, be sure to consider how much protection your home needs. If you just purchased new appliances, you might already have warranty protection on them from the manufacturer or your credit card company. The same goes for new construction homes with builder warranties. The investment in a home repair plan may not be worth it until those warranties expire. Older homes, however, tend to be the best candidates for complete home repair plans because the age of the systems and appliances leave them more vulnerable to common wear-and-tear issues.
After determining the coverage you're most likely to need, evaluate each plan with the following considerations in mind:
- Find out if there's a limit to how much the plan will cover.
- Determine how the plan differentiates repairs from replacements, and how much of either project the provider will cover.
- Ask about potential waiting periods before you're eligible to make a claim.
- Look for an affordable plan that doesn't require a deductible.
- Make sure the company employs local, licensed and insured service professionals.
- Consider how long the company guarantees parts, labor and overall repairs.
- Choose a company that offers a 24/7 emergency hotline.
- Search for providers with high Better Business Bureau ratings and accreditations.