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How Much Is A Home Warranty?
By Chris Ozarowski MONEY RESEARCH COLLECTIVE
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Whether you’re buying your first home warranty or are trying to choose between renewing your current plan and switching to another provider, it’s important to know how much various plans and add-ons should cost to avoid overpaying. There’s a wide range of home warranty providers on the market and an even wider range of custom coverage plans.
How much does a home warranty cost? How is home warranty pricing calculated? In this article, we’ll discuss the average cost for coverage of various major appliances and home systems.
A comprehensive breakdown of home warranty costs
The total cost of home warranty plans includes your yearly or monthly home warranty premiums and your service call fees. Just because a particular warranty provider offers cheaper premiums than the competition doesn’t mean that your overall costs will be lower if repairs need to be done.
One important factor to consider when calculating home warranty cost per year is your provider’s coverage limits. Providers may place limits on what they will pay to repair or replace home appliances and systems. Any repair costs beyond the provider’s coverage limits will come out of your pocket. So if you have more expensive appliances or home systems, a more expensive plan with higher coverage limits ultimately may be cheaper if breakdowns occur. It’s important to know your home warranty coverage limits to keep your total costs minimal.
Annual premiums and annual costs
Home warranty plans can be billed monthly or yearly. Some companies offer a discount to customers who elect to pay annually. According to Choice Home Warranty, the cost of a home warranty premium is calculated based on the type and square footage of a home and its geographical location. A home larger than 5,000 square feet may cost between $100 and $200 more for coverage per year.
Many providers offer home warranty plans to people who are hoping to sell their house and want to make the property more enticing to prospective buyers. Upon the sale of the home, the warranty is transferred to the new owners, providing them some assurance that they won’t get socked with high maintenance and repair costs right away.
Annual premiums for a basic home warranty plan generally range between $219 and $1,745, depending on the level of coverage, the size of the house, its location, and the types of systems and appliances it has.
Home warranty companies that allow you to choose between monthly and annual payments, such as Choice Home Warranty, may offer a discount if you pay annually. Some companies, such as American First Choice Home Club, may even have multi-year plans with cheaper annual costs. If you’re sure you would like to stick with one home warranty provider for the next few years, this can be a great way to save money, but paying for multiple years at once may be a non-starter for many people.
Monthly costs
Some home warranty providers allow customers to pay monthly premiums instead of annual ones. While this may be financially easier for many people, keep in mind that your provider may charge you more in total during the year if you choose to pay monthly instead of annually. When paying monthly instead of yearly, the price difference is usually around $50 to $100.
Service call fees
Each time you make a service request, your home warranty provider will charge you a service call fee (also known as a deductible or a trade fee). Payment of this fee is required to set up a service appointment and is non-refundable, even if the home warranty provider denies coverage or the contractor can’t access your property. Service fees generally cost between $75 and $125. The price of your service call fee depends on the price of your home warranty premiums. Some home warranty companies, like America’s First Choice Home Club, allow customers to choose how much they would like to pay for service calls. The more they choose to pay for service calls, the cheaper the annual or monthly premiums will be.
To avoid overpaying service call fees, read your home warranty coverage terms carefully. Home warranties only cover damage from normal wear and tear and may refuse to cover damage caused by improper use. For example, a home warranty provider may deny coverage if a toddler stands on an open dishwasher and breaks it.
Since service call fees are non-refundable, requesting a service appointment for repairs not covered by your home warranty provider is a waste of time and money. Understanding your home warranty’s terms can be very important for avoiding unnecessary expenses.
Typical price ranges for coverage levels
How much do home warranty plans cost? Plans and pricing vary between providers, with some providers giving you the option to create customizable plans tailored to your needs.
A basic plan usually covers six to ten of your most-used appliances, such as your washing machine, refrigerator, clothes dryer, dishwasher, and stove. Sometimes, instead of covering appliances, a basic systems plan may include some coverage for a few home systems, such as electricals and plumbing. A basic home appliance warranty costs around $40 a month.
An extended home warranty plan will provide coverage for major home systems and appliances, including air conditioning, ductwork, and ceiling fans. The average monthly cost for an extended plan is around $60.
Most home warranty companies will allow you to purchase add-ons to add coverage for extra appliances or systems. Add-ons may provide coverage for items such as:
- Pools and Spas
- Well Pumps
- Sump Pumps
- Central Vacuums
- Limited Roof Leaks
- Septic Systems
- Second Refrigerators
- Stand Alone Freezers
- Septic Tank Pumping
On average, add-ons increase your annual home warranty cost by about $100 to $500. Some add-ons can be as cheap as $25 a year, but more expensive add-ons, such as pool and spa coverage, can add as much as $300 a year.
How to save money on your home warranty coverage
You can find something that fits your budget and needs by comparing the different home warranty plans from top home warranty providers. Always read your home warranty coverage terms carefully, as service call fees are non-refundable even if the warranty company denies coverage.
Choose between the top warranty companies
While there are many home warranty providers, some are better than others. When considering a provider, it’s good to know what they are the best at and how they compare to the competition.
It may be a good idea to avoid less reputable home warranty providers, even if they may offer cheaper rates. Some home warranty plans appear cheap on the surface but may have strict coverage limits or a reputation for denying claims. Choosing a less reputable home warranty provider may cost you more in the long run once something in your home breaks and the provider refuses to cover it.
Pick the plan that has what you need
To save as much as possible on your home warranty, don’t pay for coverage you don’t need. Some providers only offer plans with basic coverage and packages of add-ons to provide coverage for extra items, such as pools and septic systems. Other providers may allow you to create completely customized plans by excluding items you don’t need to be covered. Creating a custom plan tailored to your home may help you save money on annual or monthly premiums.
Maintain home systems and appliances to prevent uncovered unexpected expenses
Home warranty companies only cover repairs for an item that stops working due to expected wear and tear. If your provider determines that your appliance or home system was not maintained properly, it may deny coverage. Some providers, such as America’s First Choice Home Club, require you to pay for annual maintenance to cover select systems, such as HVAC. Always read your provider’s coverage terms carefully to understand what maintenance is required.
Proper maintenance can help you save on home warranty costs by ensuring that any breakdowns will be covered – and preventing some breakdowns before they happen.
Consider getting a transferrable plan
While home warranties are calculated based on the home’s type, size, and location and are usually not transferable to another house, it is possible to transfer your current policy to the new homeowner once you move. Check whether your provider allows warranty policy transfers by reading the coverage terms or contacting them directly. Having a transferable warranty on your home may make it easier to sell.
Some home warranty providers allow you to use the time you have left on your current warranty as credit towards a home warranty on your new home when you move. If you plan on moving soon, this could be something to consider.
Know the average prices of warranty when getting a quote
Knowing the average price of a home warranty can give you some perspective when getting quotes from providers. Usually, your home warranty cost averages between $219 and $1,745.
However, since every house is different and home warranties are calculated based on home size, location, type, and extent of coverage, this number may not be accurate for you. It may be best to get quotes from various home warranty providers and calculate an average yourself. This way, you can accurately compare quotes tailored to your specific needs.
The benefits a home warranty plan has for first-time home buyers
A home warranty can give first-time home buyers important peace of mind by preventing large expenditures on unexpected repairs. When you have a home warranty, it’s easier to plan for the future, as you know how roughly much you will pay annually. Without one, unexpected repairs can significantly dent your monthly or annual budget.
If you’re currently buying a house, consider adding a home warranty as part of the buying process. The cost of a home warranty that’s purchased as part of a real estate transaction will almost always be lower than for one bought after the fact. Further, you may be able to make the provision of a home warranty a condition of your purchase and have the seller or the broker pay for it.
Reduces costly repairs and out-of-pocket expenses
According to Select Home Warranty, the average cost for air conditioner repairs is $350, and the average cost for air conditioner replacement is $5,500. The average repair and replacement costs for plumbing systems are $300 and $3,500, respectively.
While the average cost of a home warranty is around $976 annually in premiums, home warranties can protect you from much larger expenses if something in your home breaks down.
Protects your budget
When you plan your budget, it helps if your monthly expenses are predictable. When you know how much you will need to pay if something in your home breaks, it’s easier to set money aside for that purpose. With a home warranty, you won’t be blindsided by unexpected and large repair bills for essential home systems and appliances. So long as your warranty’s coverage caps are higher than the cost of replacing an appliance or home system, you’ll only have to set aside money in your monthly or annual budget for premiums and, if something breaks, service call fees.
Provides added protection when purchasing a home
When you purchase a home, you don’t fully know the condition that the previous owner left it in. Sometimes a seller may put off replacing older appliances or home system components to avoid spending extra money before the sale.
A home warranty can help protect you by ensuring that if anything breaks due to old age or normal wear and tear soon after you move in, you won’t be stuck with sky-high repair or replacement bills.
Weigh your coverage options today
Now that you know how much a home warranty costs, you can begin to look for a home warranty that fits your budget and needs. To properly evaluate various providers, consider your priorities. Do you need maximum customization for your home warranty plan? Would you like to choose your own contractors? Would you prefer lower service fees or lower premiums?
To see how the top 5 home warranty providers in the U.S. stack up against one another, look at our list of the best home warranty companies in 2022.