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How much does a home warranty cost – and is it worth it?

Fact-checked with HomeInsurance.com

Purchasing a home warranty may be helpful in a number of situations, from attracting a buyer when selling your house to using it for financial protection as your appliances age. You may wonder if a home warranty is the same thing as homeowners insurance. We’ll cover both these topics so you can decide if a home warranty is worth it.

What is a home warranty?

A home warranty offers coverage to repair or replace appliances and certain systems within your home. Rather than paying out of pocket when something unexpectedly breaks, you pay a premium to a home warranty company who then provides coverage when something stops working. The contract lasts for a set period of time, after which you can choose to renew your coverage or let it expire.

Home warranty vs homeowners insurance

A home warranty and homeowners insurance are two very different forms of financial protection against loss. With a home warranty, you’re purchasing protection in case certain high-cost items in your home stop working because of age and normal wear and tear. Your policy may cover either the repair or replacement of things like your appliances, HVAC, or electric systems.

Homeowners insurance, on the other hand, is usually required by your mortgage lender. It does not cover anything in your home that breaks under day-to-day circumstances. Instead, your home insurance policy covers your home and belongings from specific events of loss, like fire or theft. You’ll also have some liability coverage in the event of a lawsuit because of an injury sustained on your property.

Home warranty vs Homeowners insurance

Home warrantyHomeowners insurance
Cost (average premium)$300 to $600 per year$1,211 per year
CoverageCovers repair or replacement of major appliance and home systemsCovers your home and belongings during events like fire, theft, or liability.
Required by lenderNoYes
Available add-onsPool
Spa
Septic
Flood
Hurricane
Earthquake
DeductiblePaid as service fee when you file a claim.Deducted from reimbursement when you file a claim.

How does a home warranty work

When a covered item breaks or malfunctions, you can file a claim with your home warranty company. For example, say your dishwasher completely stops working. You would call your home warranty company, who would then send out a vetted technician to assess the problem. You’ll be charged a flat fee for this visit, but the warranty covers any costs above this initial visit, whether it’s a new part to fix the dishwasher, or a new machine altogether. 

How much does a home warranty cost?

There are many factors that impact the cost of your home warranty. Warranties for larger homes typically cost more than smaller homes since systems would likely be more expensive to replace. The extent of your coverage also has an impact. Many warranties allow you to customize your coverage, so the more you add, the more you’ll pay. 

Here are a few things to consider when determining your home warranty coverage:

  • Coverage limit: Each covered item may have a limit on how much the warranty company will actually pay out. Major systems like your plumbing or electricity could exceed this number if major work is required. 
  • Age of covered items: If your appliances are only a few years old, then it may not be worth paying for a warranty to cover them. On the other hand, if you know many of the systems in your home are reaching their age limit, a warranty can help ease the cost of replacing many failed items in a short timeframe.
  • Pre-existing conditions: Warranty companies don’t typically cover issues that you already know about. This could come up if you recently bought the home and had an inspection that uncovered a problem. 
  • Depreciated value: If the item in question can’t be repaired, you may be reimbursed by the warranty company to replace the item. However, check your coverage details — if they only cover the item’s depreciated value, you may only receive the item’s current value. For example, a 15 year-old refrigerator wouldn’t actually be worth that much.
  • Fine print: Your home warranty likely comes with a number of exclusions. Make sure you understand them before you need to file a claim, otherwise you might not be covered under certain scenarios.

Approximate repair costs

ItemCost out-of-pocket
HVAC$150 to $450
Water heater$529
Exhaust fan$100
Toilet$225
Garbage disposal$250
Refrigerator$200 to 4400
Dishwasher$230
Washing machine$50 to $180
Dryer$100 to $400

Is a home warranty worth it?

Determining whether or not a home warranty is worth it depends on your personal situation. Look at the age and condition of the appliances and systems in your home. If only a few are aging, but the rest are newer or in good condition, then a home warranty may not be right for you. After all, you want to make sure you actually use the coverage you pay for each year.

However, if you’ve kept up with your home maintenance but simply have a lot of aging components that are more likely to need repair or replacement, then a warranty may be right for you. This can help you avoid multiple repairs in a short time span, which can be very taxing on your wallet. You may also want a separate warranty for more complex, expensive items, like your pool or septic system. 

Another common scenario for purchasing a home warranty is when you’re selling your home. It can be an attractive feature to homebuyers, especially if it’s their first time buying. It provides them with a financial buffer during a very expensive transitional period of life. 

The takeaway

  • A home warranty differs from homeowners insurance based on the circumstances regarding payout.
  • It covers the repair or replacement of certain items in your home due to normal wear and tear.
  • There may be a limit on what is covered and how much.

A home warranty can give you peace of mind that you have coverage on the normal deterioration of your appliances and systems at home, in addition to the coverage you receive from your homeowners insurance. Just be sure to read the fine print to make sure the policy works in the way you expect it to. Otherwise, you may have an unpleasant surprise when a claim is denied because you didn’t understand the details.

Lauren Ward

Lauren Ward is a writer for Coverage.com. She specializes in all things personal finance, including insurance, loans, and real estate.

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