Understanding Home Warranty Costs: What You Need to Know

Surya Yadav

What is a Home Warranty? A home warranty is a service contract that covers repairs and replacements for your home’s systems and appliances that break down due to normal wear and tear. When something covered breaks, you pay a service fee, and the home warranty company arranges for a contractor to come to your home and perform the needed repair or replacement.

Typical Costs for Home Warranty Plans

Of course, before signing on the dotted line, anyone shopping around wants pricing information for a home warranty. Plans typically cost between $300-$700 per year in the U.S. The price varies depending on your location, the size of your home, and the level of coverage. Basic plans cover heating, air conditioning, plumbing, electrical, and appliances. More comprehensive plans also include coverage for items like pools, spas, well pumps, and roof leaks.

Deductibles and Service Fees

All home warranty plans charge a service fee, typically around $60-$125, each time you file a claim. There is also often a deductible amount the homeowner pays per repair, such as $100 for air conditioning repairs.

The specific details differ between providers but expect to pay a deductible and/or service fee each time you need to use the home warranty. Carefully check policy details so you understand any fees you must pay when making a claim.

What’s Typically Covered?

A basic home warranty includes coverage for:

  • Air conditioning and heating systems
  • Electrical systems
  • Water heaters
  • Built-in appliances like dishwashers, ranges, ovens, and refrigerators
  • Plumbing pipe leaks and clogs
  • Electrical panels, wiring, and outlets

Upgraded plans can also include coverage for items like pools, spas, well pumps, and roof leaks. Most home warranty companies limit the age and size of items they will cover, especially with heating, air conditioning, and appliances.

Exclusions and Limits

Home warranties do not cover everything. Typical exclusions include:

  • Normal maintenance and cleaning
  • Known defects that existed before the policy started
  • Damage from misuse, accidents, or lack of maintenance
  • Cosmetic defects and normal wear and tear that do not impair functionality
  • Consequential damages (like food spoilage from a broken refrigerator)

Many plans also limit the amount they will pay for any single system or appliance. Check policy details carefully for coverage amounts and exclusions. You may be responsible for repairs excluded by the warranty or costs above the coverage limits.

Is it Worth the Cost?

Whether or not a home warranty makes financial sense depends on several factors:

  • Age of systems/appliances. If all your equipment is new, it may not be worth paying for coverage since parts and labor are likely still under manufacturer warranty.
  • Your repair deductible and service fees. If they are high relative to typical repair costs in your area, the warranty plan expenses could potentially outweigh the coverage benefit.
  • Lead time to approve claims. Many providers have delays in dispatching contractors, leaving you to pay significant costs upfront for emergency repairs. Slow turnaround hampers the convenience a home warranty aims to provide.
  • Your comfort with home repairs. If you are unable or unwilling to coordinate finding repair technicians and negotiating fair pricing yourself, a home warranty’s guaranteed contractor dispatch provides value despite higher costs.

In the end, home warranties can provide security, value, and convenience for some homeowners. Just be sure to understand your policy details before committing to coverage. Pay close attention to costs, coverage limits, exclusions, and responsiveness when selecting a provider. Evaluating these key factors will determine whether the expense makes sense for your situation.

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