Are Home Warranties Worth It?
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Do you have a plan and an emergency savings fund to overcome unexpected repairs for a major appliance in your home? Over time, regular wear and tear causes equipment to break down. Homeowners must often forego the service if it's not in their budget or use credit cards to cover the expense. When considering if a home warranty is worth it for your specific situation, you should analyze the condition of appliances and systems in your home. If they're aging, yet still in good working condition, a policy is significant protection to invest in.
Throughout this article, our dedicated research team will educate you about what to expect when you buy a home warranty. You will find out why it's a valuable companion to an existing homeowners insurance policy, the overall costs, and who benefits most from obtaining coverage.
Is a home warranty worth it for your peace of mind? We highly recommend it, and after careful consideration, suggest American Home Shield as the best overall provider. American Home Shield provides ample protection for covered items, affordable costs, and exceptional customer service that policyholders require.
To get a free quote from American Home Shield, call 844-529-9298 or fill out this online form.
Let's take a closer look to show you the details you need to know before buying a home warranty.
What Is A Home Warranty?
A home warranty plan is an optional coverage plan that provides financial assistance to cover the repair costs of breakdowns of appliances or systems. Companies in the industry typically offer different packages that focus on various equipment throughout the home. Homeowners can choose the best plan that fits their budget and protects the covered items they rely on most.
In addition to coverage for machines like washers and dryers, numerous companies offer additional insurance for add-on items. These inclusions are typically for equipment that isn't standard in every home but many homeowners still use, like swimming pools, sump pumps, and secondary refrigeration.
When weighing options between companies and asking, if home warranties are worth it, analyze its extent of coverage, and customize a plan that benefits you the most.
What Does A Home Warranty Cover?
While each home warranty company features limitations for its repair or replacement policies, generally, major appliances throughout the home are protected.
The following items are typically covered by a home warranty:
Plumbing systems
Kitchen appliances
Electrical systems
Laundry appliances
HVAC systems
Ductwork
Most of the major appliances in your home require specific repair details that may create more significant malfunctions or even safety risks if not repaired correctly.
Before purchasing a home warranty, analyze the service contract to ensure your desired appliance is covered, and the repair costs protection is sufficient.
When Do You Need A Warranty?
While a home warranty can offer numerous benefits to anyone on a budget, there are specific circumstances that can provide even more advantages.
When deciding if a home warranty is worth it, consider if you fall into one of these categories:
You are unable to repair systems and appliances on your own
You own appliances that are aged or aging
You have a tight budget and can't afford emergency repairs
To get a better understanding regarding the efficiency of modern appliances, check out this guide from the International Association of Certified Home Inspectors for reference. It provides a clear view of how much time your current equipment has before common issues require repairs or replacements.
A home warranty contract can be purchased at any time of the year but typically requires at least a one-year agreement. Some companies request an annual payment, while others offer a monthly fee.
Do Both New and Older Homes Need a Warranty?
Generally, a home warranty is more beneficial for older homes as its appliances are only protected from applicable manufacturer warranties. Newly constructed homes, on the other hand, are often covered by a builder warranty for a set time.
However, it doesn't take long for the systems and appliances in a new home to lose coverage from defects or wear and tear.
The Federal Trade Commission states that typical home builder warranties include the following:
Workmanship for walls, drywall, paint, and stucco (1 year term)
Systems like HVAC, plumbing, and electrical (2 year term)
Major structural defects that make a home unsafe (10 year term)
The FTC also suggests that most policies do not include any protection for appliances, as new units are covered under manufacturer warranty. Depending on the amount of coverage, insurance may be limited to warranty cover for parts but homeowners are still responsible for labor charges.
What's the Difference Between A Home Warranty and Homeowners Insurance?
Is there a need to buy a home warranty and hold homeowner's insurance in the same household? Of course. While they both provide a level of protection, their purposes are far from the same.
Homeowners insurance is required to help repair your home or replace personal property after a covered event, like fire or theft. This protection often comes with liability coverage to pay for legal fees or medical bills if a visitor is injured at your home.
It's important to understand the service agreement for both types of insurance, so you know which party to call when in need.
For example, if your HVAC system is acting up or making noises, you'd benefit a home warranty, not homeowners insurance. Additionally, you'd want a home warranty if the washers and dryers in the home are leaking or drying inefficiently.
On the other hand, if a tree has fallen and damaged equipment in the home, you'd need homeowners insurance, not a home warranty. Similarly, you'd rely on homeowners insurance if a burglary resulted in missing equipment.
How Much Do Home Warranties Cost?
Prices amongst competitive home warranty companies will vary depending on the amount of coverage you buy and your location.
Monthly Premium
The primary cost associated with a warranty is the monthly premium. However, researchers have found that the average cost you should expect is around $300 for basic plans and up to $600 per year for all-around home protection.
You should also familiarize yourself with other associated fees from a home warranty contract.
Service Fees
In addition to a monthly or annual payment, home warranty costs also include a trade service fee, due when a technician visits your property. Again, these can vary and will usually range from $75–$125 per service visit.
Other Fees
You should also be aware of fees when canceling a contract or selling your home and transferring the policy. To discover which home warranty company best fits your needs, analyze its service contract's fine print to calculate which costs you may be subject to.
Enrollment fees may also be applicable depending on the home warranty company.
Are Home Warranties Worth It?
The short answer—yes.
To find out why, we need to dig deeper and discover the benefits by analyzing the costs of repairs versus the average cost of a home warranty. In the event of an expensive breakdown to a significant system, a home warranty ensures the equipment you rely on is repaired quickly.
The reason most policyholders purchase this additional coverage is to gain peace of mind for their budgets. Especially for those who are unable to complete repairs themselves, knowing that an expert can make a repair or recommend a replacement offers excellent comfort. It also ensures that a qualified, pre-screened technician is hired for the service, as most home warranty companies use a network of experts.
Another benefit is that since most providers don't require a home inspection, you shouldn't be hesitant to buy service due to dated appliances. Of course, if a unit is already failing, it's considered a pre-existing condition. It will not be covered under most home warranty contracts.
Repair Costs vs. Warranty Costs
Consider the benefits you stand to gain from a home warranty company by comparing differences between a contract's average cost and national averages for common repairs.
Average Annual Cost by Plan:
Systems Plan: $300–$400
Appliance Plan: $430–$720
Combo Plan with Add-Ons: $700–$1,000
Sample Appliance Repair Costs:
Plumbing System and Stoppages: $311
Electrician Service: $300
Washing Machine: $120–$500
Dishwasher: $100–$200
Refrigerator: $200–$400
Limited Roof Leaks: $150–$400
Well Pump Replacement: $876–$2,311
Sources: Consumer Affairs: Contract Costs, Home Advisor: Average Repair Costs
The savings a home warranty contract potentially provides are substantial and an efficient form of budget protection. Keep in mind, a repair or replacement of a system or appliance may not be completely covered if its value exceeds a policy's limitations or exceptions.
A Home Warranty We Think Is Worth it: American Home Shield
We have reviewed multiple home warranty companies, and we recommend American Home Shield as the best overall company to cover your belongings. Its commitment to customer service, comprehensive coverage, and affordable costs were significant in our decision.
To get a free quote from American Home Shield, call 844-529-9298 or fill out this online form.
AHS Home Warranty has proven to hold the top spot according to our research team due to these highly valuable perks as a home warranty provider:
Four plan options. Customers can choose between the Appliances, Systems, Combo, or Build Your Own plans.
Unique Build-Your-Own Plan: This plan gives you the option of choosing the 10 major systems and appliances you need covered.
Choose your service fee. Based on the monthly premium you select, you can adjust the amount you'll pay at the time of service.
Fast service request response: AHS assigns professionals to a customer's service request within the first 24 hours 98% of the time.
Conclusion
A home warranty contract is worth it for many consumers because it provides peace of mind and potentially significant financial savings in the event of an appliance or system breakdown.
Considering a home warranty is a big decision, and we hope we've made it easier for you. As researchers in the home warranty industry, we're here to provide you with as much objective information as we can. As always, we recommend that you request quotes from multiple providers and read all of the fine print.
Home Warranty Rating Methodology
The Home Service Research Team at Better Homes & Gardens strives to provide unbiased and objective reviews to readers by compiling relevant information on home warranty companies and rating the providers on a variety of factors.
Here's what our review process looks like:
We examine each provider's website to determine plan details, coverage, customer service offerings, and other benefits. We also speak with company representatives to get more insight on plan details.
We read sample contracts from each home warranty company to analyze and compare coverage details, limits, and exclusions.
We read at least 100 third-party customer reviews for each home warranty company to determine the real-life benefits and drawbacks of each provider.
We gather cost information for a variety of home warranty plans in different states by completing online quote forms and speaking with sales representatives to simulate the quote process.
We revisit each company's offerings on a seasonal basis, ensuring that we include the most up-to-date information in our reviews.
We also created a 100-point rating system to score companies based on objective factors, such as plan options, coverage, and customer service:
Overall, the Home Service Research Team has reviewed over 70 home warranty companies to select the top-rated providers in the industry.
