Are home warranties worth it?
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It’s a fact of homeownership that things will eventually break. Appliances fail, pipes leak and HVAC systems can stop working at inconvenient times. Instead of exhausting savings on these emergency fixes, some people get home warranties to cover common repairs. But are home warranties worth it?
Researching a reliable provider and reading the fine print of a home warranty policy helps set proper expectations. When used correctly for covered issues, home warranties bring peace of mind to homeowners, but they’re not a blanket guarantee of free repairs. Learn what’s covered (and not) and whether the benefits outweigh the costs for your home and needs.
What is a home warranty?
A home warranty covers repairs and replacement costs for home systems and appliances that break due to defects or wear and tear. In contrast, homeowners insurance covers property damage from fires, floods or theft.
A home warranty doesn’t replace homeowners insurance but offers protection by reducing out-of-pocket costs for many common home repairs. “Without a home warranty, you struggle to search for nearby repair companies that can get the work done, and it might cost you a lot,” said Ryan Hawker, founder of H3 Homebuyers.
What do home warranty plans cover?
Understanding what’s included will help you choose adequate coverage levels. Home warranties generally cover major home systems, such as:
Electrical
Heating and air conditioning
Plumbing
Water heater
Most also cover home appliances like:
Dishwasher
Oven/stove
Refrigerator
Washer and dryer
Higher tiers of coverage can include extras, such as pool equipment, well pumps and septic systems.
What’s not covered in home warranty plans?
While home warranties provide valuable protection, they have exclusions and limits you should be aware of, including:
Code violations: Bringing systems up to current building codes isn’t covered in a standard warranty.
Improper installation: Faulty contractor work or DIY mishaps void warranty coverage.
Lack of maintenance: Not doing annual tune-ups or recommended care can disqualify claims.
Cosmetic damage: Chipped appliances, scratched floors or faded paint aren’t included.
Preexisting conditions: Home warranties exclusively cover repairs that came to your attention after signing your contract; the home warranty won’t repair or replace anything broken before coverage starts.
Who should get a home warranty?
Whether you need a home warranty depends on factors like your home’s age, the condition of your systems and appliances and your budget flexibility.
According to the National Renewable Energy Laboratory (NREL), the average life expectancy of key home systems is as follows:
Air conditioner: 16 years
Gas furnace: 20 years
Heat pump: 15 years
Water heater: 12 - 20 years
If your home’s systems and appliances are newer and still under manufacturer warranties, a home warranty may not yet be necessary. Consider skipping if you have ample savings to cover repairs and replacements out-of-pocket without straining your budget.
Still, a home warranty can provide valuable protection for older homes with aging appliances prone to breakdowns. Hawker said, “People in older homes are always the ones I recommend the most to have a home warranty” because the older your home, the more likely you’ll need to repair or replace expensive systems like the AC, furnace or water heater in the future. With a home warranty, you can save significantly on these big-ticket repairs.
When deciding on whether to get a home warranty, weigh the potential savings on repairs versus paying for the policy upfront. Also, consider how coverage could impact your home’s value and appeal to buyers down the road.
Home warranty vs. out-of-pocket repairs
When weighing the value of a home warranty, compare potential costs to paying out-of-pocket. The national average cost for a home warranty is around $55 per month, plus your service call fee when you make a claim. But those monthly fees add up to about $660 annually, so will they likely exceed your repair costs?
We analyzed prices from big box stores in March 2024. Here’s a look at what it costs to replace some common home appliances:
Common appliance replacement costs
So if, for example, you needed to replace your dryer, dishwasher or refrigerator, a home warranty would be more than worth it. On the other hand, if nothing at home breaks during your contract, you’re essentially paying for coverage you don’t need. So, analyze your home’s systems, age and repair history to gauge potential savings.
How home warranties affect property value
According to researchers Justin Contat and Bennie Waller, “offering a home warranty is associated with a price premium of at least $4,000 and a reduction in time on the market of at least 2.5 days.”
San Diego realtor Renata Vicente of Berkshire Hathaway HomeServices echoed a similar point of view. “It shows you’re willing to stand behind the condition of your home and ensure any unexpected issues are covered,” said Vicente, which can translate to a higher chance of selling.
Home warranties can make a home more appealing to buyers in the following ways:
Higher sales price: Buyers may be willing to pay slightly more for a home with warranty coverage.
Marketing advantage: Sellers can promote a home warranty as an added value to compete with other listings.
Peace of mind: Warranties assure that appliances and systems are covered from defects. This gives buyers confidence during the home shopping process.
Potentially shorter time on the market: Offering a warranty may help a home sell faster by reducing buyers’ financial concerns.
However, a home warranty isn’t a magic bullet for increasing property value. Factors like location, schools, renovations and overall condition also play a significant role. Consult local real estate agents to see if home warranties align with buyer expectations in your market. They can advise if offering coverage would set your listing apart — but don’t rely solely on a home warranty to increase value.
What real customers think
Feedback is mixed when looking at consumer reviews and real-life experiences with home warranties. Many consumers praise the savings and convenience of home warranties when they work smoothly. But frustrations arise around denied claims, slow contractors and perceived lack of value versus fees paid.
Here are some typical reviews:
“My water heater stopped working one day. I filed a claim with my home warranty company, and they came out promptly the next day. All I had to pay was the $75 service call fee, and they fixed the issue within an hour.” - Jeff N.
“My water heater broke, and the basement was flooded. It took more than a week to install the replacement … and we did not have hot water at home for a week. They were extremely slow in response to this urgent request.” - Manoj U.
When should you purchase home warranty coverage?
In short, it’s best to get home warranty coverage as soon as possible. The sooner you get it, the more peace of mind you’ll have if something breaks unexpectedly.
Existing homeowners should aim to start coverage before major systems exceed recommended lifespans. Appliances like HVAC units and water heaters over 10 years old, for example, can benefit from warranty protection.
No matter your situation, maintain continuous coverage and avoid gaps. Home warranties typically give 12 months of protection with annual renewal. Lapsed coverage leaves you vulnerable. Look for new-customer discounts to reduce first-year costs or bundle with existing insurance to lower rates.
How to research and evaluate home warranty providers
Choosing the right home warranty company is critical to getting the best value. According to Palm Springs, California, realtor Richie Usher of Richie Usher Realty Group and Equity Union, “What sets them apart is a high level of customer service … because let’s face it — if you’re calling, it’s because something’s wrong and bad service can really add to your stress level. On the flip side, receiving prompt and friendly service can relieve that stress.”
As such, Usher recommends getting referrals directly from your realtor (who may receive compensation) or a trusted source who has had a positive experience with their home warranty provider.
Consider the following when researching coverage providers:
Claims process: Good customer service response is imperative when filing claims. Take time to understand the claims process, service fees and coverage limits. A quick turnaround on approvals is ideal.
Contractor network: The provider should have an extensive network of contractors, so you have options for repairs. Look for national networks that have local technicians near you.
Coverage options: Look for a provider that offers different plans to suit your budget and needs. Ensure the plans cover major systems like HVAC and your most-used appliances.
Discount eligibility: Many providers offer discounts for new homes, multi-year terms or bundling with insurance.
Extra services: Perks like 24/7 emergency dispatch, home maintenance tips and recall notices can add value beyond repairs.
Industry reputation: Search online reviews on Google and Yelp and check sites like the Better Business Bureau to see complaints and feedback.
How to read the fine print of a home warranty
Always read the fine print before committing to a home warranty. This helps you avoid surprises about exclusions, limits and fees.
Look out for:
Cancellation policy: Know the costs and cancellation process if you’re dissatisfied with coverage.
Claim limits: There may be caps per claim, services per visit and annual coverage maximums that impact costs. Some home warranty companies may only repair broken items, not replace them.
Contractor credentials: Ask your home warranty provider how it chooses its contractors. Confirm providers are licensed and meet background check requirements.
Coverage exclusions: Many warranties exclude items like ductwork, wells, pools and damage due to lack of maintenance. Know what’s not covered.
Transferability: Can the contract transfer to a new homeowner if you move? Is there a fee?
Read the contract thoroughly and ask questions if anything needs clarification before signing. Being an informed consumer empowers you to choose the home warranty that meets your needs.
What laws govern home warranties?
Both state and federal regulations aimed at protecting consumers govern home warranties:
Federal oversight: Home warranties can’t misrepresent coverage or make false promises. The Federal Trade Commission provides regulatory guidance on unfair or deceptive practices. The Consumer Financial Protection Bureau also oversees consumer complaints.
State laws: Most states require home warranty companies to be licensed and registered (check your state). This helps ensure providers are legitimate operators in the state. States also have specific laws on contract transparency, claims handling and more.
The best way to work with a provider following applicable laws is by researching reputable national and local home warranty companies. As a consumer, you can file complaints if you experience issues with misleading marketing, pre-sales disclosures or contract fulfillment.
Bottom line
When something breaks at home, you want to know that repairs won’t break the bank. You can reduce surprise repair costs by getting a home warranty. But home warranties have exclusions and limits. They don’t cover everything, so read the fine print closely. Costs like service fees can also add up over time.
Think about your home’s condition and repair history before deciding. Home warranties provide the most value for older homes with systems nearing replacement age. An emergency fund could serve the same purpose for newer homes without recurring costs.
Choosing the right policy and provider is paramount for maximizing benefits. When used strategically, warranties can give you confidence in managing finances for unforeseen breakdowns.
Frequently asked questions (FAQs)
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