Are Home Warranties Worth It? (2024 Guide) (2024)

A home warranty is a service contract that allows homeowners to avoid expensive repair bills. A home warranty will cover the cost in lieu of paying out-of-pocket for a repair, given that the policyholder pays a monthly premium.

By owning a home warranty, millions of homeowners have peace of mind that their appliances or systems breaking down will not also break their bank accounts. Like health insurance companies, home warranty companies set their prices to an amount where it is probable that they will make more money off your payments in the long run than they will spend servicing your home. However, most homeowners who own a home warranty know this and still believe their home warranty is worth it.

Instead of paying for repairs or replacements out of pocket, home warranty companies charge you a monthly premium and a service call fee every time you need a repair. You would simply pay your service fee (roughly $75–$125) to have a certified technician repair or replace your heating system.

Most home warranty companies will send a technician within 24 to 48 hours to repair or replace your system or appliance. Reputable home warranty companies operate their claims center 24/7 to get a repair person out to your house as quickly as possible. These companies also tend to provide emergency services if an appliance or system needs an emergency repair.

A home warranty typically covers major home systems and appliances. The exact coverage will depend on the specific home warranty provider and plan you choose but typically includes items such as:

• HVAC systems (heating, ventilation, and air conditioning)
• Plumbing and electrical systems
• Kitchen appliances (refrigerator, oven, dishwasher, etc.)
• Laundry appliances (washer and dryer)
• Water heaters
• Garbage disposals
• Ceiling fans
• Garage door openers

It’s important to note that home warranties do not cover preexisting conditions or items that have been improperly maintained or installed. Additionally, some plans may limit coverage amounts and service fees, so it’s important to read the terms and conditions carefully before purchasing a home warranty.

Generally, home warranty policies do not cover all household items or causes of damage. Some of the most common exclusions you will find on home warranty contracts include:

• Damage from pre-existing conditions
• Cosmetic damage
• Damage caused by acts of nature
• Home modifications
• Neglect or lack of maintenance
• Commercial-grade appliances
• Non-operational units
• Outdoor components
• Cosmetic appliances
• Mismatched systems
• Secondary or detached structures
• Items under manufacturer warranty
• Items not included in your list of covered items
• Unusual wear and tear resulting from misuse

Some home warranty policies have additional exclusions. You can review your policy details to understand what is and is not covered under your plan.

Pros and Cons of Home Warranties

The cost of a home warranty depends on various factors, including the provider you purchase your warranty from and the specific home warranty, plan you purchase. As mentioned before, home warranty companies charge you a monthly premium, which you pay every month.

They will also charge you a trade service fee, which you will only owe when you need a repair or replacement of your system or appliance.

A home warranty typically costs $40 to $75 per month, with an additional service fee of $75 to $100 per visit. However, your home warranty cost will depend on your location, home size and more.

How Much Is a Home Warranty Monthly?

Based on quotes we gathered, a home warranty usually costs $40 to $75 a month, with an additional service fee of $75 to $100 per visit. The exact price of your warranty will depend on your location, home size and other variables specific to your home.

Source: Home Depot

In order to determine whether or not a home warranty is worth it for you, it is important to know the cost of some of the most common home repairs and replacements. The table below shows the cost of repairing or replacing some of these common items, according to House Method.

Many appliances and systems you need in your home are not cheap. This is especially true when you have to replace them instead of repair them. Each of the five items in the table below costs at least $1,250 to replace, while the repair costs are at least $150. These are just a few of the many appliances and systems in your home that you might have to repair or replace, and it is not uncommon for multiple items to break down or need repairs in the same month.

Here are the associated costs of common home repairs and replacements:

Whether or not a homeowner needs to purchase a home warranty is a personal decision. Like choosing not to purchase health insurance, you are taking a gamble if you decide not to purchase a home warranty. You could potentially save money by not purchasing a home warranty, but it’s risky.

To our review team, purchasing a home warranty is advisable for most homeowners because they often don’t have thousands of dollars in savings for expensive, unexpected home repairs. On the other hand, for our readers who are very wealthy and have thousands of dollars in savings, it may not be worth buying a home warranty since it typically costs a bit more in the long run than not buying one.

We realize that most of our readers need financial protection, and many want to know our opinion on the best home warranties in the industry. To help you find the right provider for your needs, we compiled a list of the best home warranties in the nation.

Below, we discuss our top-ranked provider, American Home Shield. We have included a link to the company’s quote form and phone number if you want to contact this provider.

If you already have a homeowner’s insurance policy, you may be wondering if you also need a home warranty. While home warranties and homeowners insurance may cover similar items, you use the policies in different circ*mstances.

Homeowners insurance is a type of financial protection that compensates you for sudden damage to the structure of your home, or that causes a loss of your property. For example, if there is a fire in your kitchen, a homeowners insurance policy would help cover the cost of damage to both your home’s structure and the loss of appliances. Other common named perils, or situations that entitle you to a payout from your insurance provider, might include lightning strikes and burglaries.

Home warranties offer coverage only if your systems or appliances fail because of normal usage and wear and tear. It will not pay for a repair or replacement if a fire or natural disaster damages your kitchen or the home structure as homeowners insurance does. This difference in coverage is why lenders usually require people to secure homeowners insurance as part of a mortgage agreement but do not require a home warranty.

With so many companies offering home warranty plans, how can you be sure you’re getting the best option for your home? Use the following steps to narrow down your choice of home warranty providers:

1. Define which items you need coverage for: Walk through your home and create a list of all of the systems and appliances you want included in your home warranty coverage. Remember that the more items you include, the more expensive your monthly premium will be.
2. Determine your coverage needs: Next, think about how much coverage you would need for each of your major systems and appliances. For example, how much would it cost to replace your fridge if it broke? Prior home repair bills can provide insight into how much coverage you might want to buy for your home’s major components.
3. Compare home warranty providers: Using your list of essential home systems and appliances, start comparing sample policies between top-rated providers. You can view a quick comparison of our top recommended providers using our guide to the best home warranties. It can be helpful to narrow down your choice to three options before proceeding.
4. Get quotes: Be sure to get a custom quote from each home warranty provider you’re considering, as coverage inclusions, limitations and terms might vary. Keep a copy of each quote in writing, and make sure to note how much the company charges as a service fee each time you use your coverage.
5. Talk to a representative: Before buying coverage, consider connecting with a representative from each major home warranty provider to ask more questions. Calling with a few sample questions can give you insight into the level of service you would receive if you were a customer. You can also look at customer reviews on platforms like the Better Business Bureau (BBB) and Trustpilot for more insights.

While a home warranty can benefit certain homeowners, it may not be worth the cost for everyone. Take a look at your household finances to calculate if you need a home warranty. If you have an emergency fund, you may have enough to cover the cost of home repairs out-of-pocket, making a home warranty redundant.

You may also be able to pass on a home warranty if your appliances are still under warranty. If you recently invested in new appliances or bought a new home, existing warranties may cover these items. Because most home warranties explicitly exclude items covered by another warranty, property owners with a manufacturer’s warranty would not need home warranty coverage.

Generally, it’s important to read your contract thoroughly before signing and to choose coverage from a reputable provider to avoid misunderstandings relating to the warranty.

Buying a home warranty is not the only way to safeguard yourself against the cost of unexpected home system and appliance repairs. Consider the following alternatives if you believe a home warranty is not the right choice at this time.

Build an Emergency Fund

One alternative to a home warranty is building and maintaining a robust emergency fund. An emergency fund serves as a financial safety net, allowing you to cover unexpected repair costs without the need for a warranty. By consistently contributing to this fund, you gain financial flexibility and peace of mind, ensuring you are well-prepared for any sudden home-related expenses. You also avoid paying for warranty coverage you’re not using — and you can use this fund toward another financial emergency if needed.

Extended Manufacturer's Warranty

When purchasing new appliances or home systems, explore products that come with extended manufacturer warranties. These warranties often provide coverage beyond the standard terms, offering protection against product defects and malfunctions. This extra coverage lets you skip the extra cost of a home warranty. Opting for products with extended warranties can be a strategic way to mitigate repair costs, especially for high-value items in your home.

Before purchasing a home warranty, review the contracts and service details of your current appliances to see if any remain covered under an original manufacturer’s warranty. As a note, home warranty contracts usually exclude coverage for items under another warranty.

Only Cover High-Risk Items

Instead of opting for a comprehensive home warranty plan, consider targeted service contracts for high-risk items in your home. For example, suppose your HVAC system left you with an expensive repair bill in the past. In that case, you might want to consider purchasing a systems-only plan that specifically covers HVAC repairs and replacements. This approach allows you to tailor coverage to the most critical areas of your home, saving on overall costs.

DIY Skills and Education

Learning how to handle minor home repairs can empower you as a homeowner and help you save hundreds on home maintenance and repairs. You could invest in a home repair course online or at your local community college, or research free resources online that guide beginners through the basics of home repair. While you should avoid taking on repairs to your major systems as an inexperienced home repair professional, learning to tackle basic maintenance tasks and common repairs can help you avoid buying a home warranty.