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A Homeowner's Guide to Home Warranty Costs, Coverage and Worth

Last Updated: November 14, 2023

Home warranties are very similar to other types of warranties. They protect against the sale of a "lemon", in legal terms. You can insure your house against electrical system failures, plumbing problems, roof collapses, etc. It is typically a tool of a home seller or real estate agent to attract potential buyers, but it is also useful to first-time home buyers or short sale home buyers to prevent against an unforeseen loss.

First time home buyers are usually unaware or unsure of potential problems with the house they just bought. A home warranty program will keep large, unexpected costs out of the picture. Often times, a home buyer will not even have to pay for home warranty insurance, since the seller or the real estate agent picks up the cost to assure the sale.

Even if you are not selling your home, you may benefit from buying a home warranty plan. Older homes may have problems overlooked by building inspectors or the average homeowner. Small monthly payment is always a better tradeoff than a $20,000 repair bill.

Average Home Warranty Costs #

A new home warranty plan is usually purchased by a real estate agent or private seller for a period of time for the new homeowner. The cost of a home warranty typically ranges from $300 to $700 per year on average. Here are some of the key factors affecting home warranty pricing:

  • Coverage tiers - Basic plans start around $300 - $500 while more comprehensive coverage is $500 - $700+. More inclusions mean higher premiums.

  • Deductibles - Standard is $50 - $100 per service call. Higher deductibles of $100 - $200 reduce the premium.

  • Home size - Larger homes over 3,000 sq ft often cost more for coverage than smaller homes.

  • Age of home - Older homes generally cost more for warranties than newer construction.

  • Location - Home warranty rates are higher in some markets like California and Florida.

  • Brand - Larger providers tend to cost more than smaller companies for the same coverage.

  • Duration - Multi-year plans often have discounted annual pricing compared to single year terms.

For the average single family 2,000 sq ft suburban home, expect to budget $400 to $600 per year for decent home warranty coverage. Always compare plans.

Home Warranty Cost Examples #

For my 1,800 sq ft single-story Florida home, I paid $429 per year for a basic 'Bronze' home warranty plan that covered AC, heat pump, plumbing, ceiling fans, garbage disposal.

On my old 2,500 sq ft home here in Texas, I opted for a mid-tier 'Silver' home warranty plan for $595 per year that also included coverage for my pool equipment and well pump.

For my larger luxury home, I wanted comprehensive protection so I purchased a 'Gold' plan for $725 annually that covered all major systems like HVAC, plumbing, electrical, appliances.

I have a rental condo in California that I cover with a basic home warranty for just $350 per year in case anything breaks down between tenants. It covers plumbing, electrical, appliances.

For my vacation cabin in Colorado that often sits vacant, I bought a discounted multi-year home warranty for $475 per year to have coverage while I'm away. It was cheaper than single year policies.

As shown, annual costs range from $350 to $725+ depending on factors like home size, coverage tier, and location. Premium warranties offer more protection.

Are Home Warranties Worth It? #

Here are some real opinions on whether home warranties are worth it from people who have purchased them:

"I think the home warranty is worth it for the peace of mind on my older home's systems. When my AC unit failed, they covered most of the $5,000 replacement cost after my $75 deductible. So it already paid for itself this year."

"My home warranty lets me spread out the risk of expensive home repairs and breakdowns for a small monthly fee. For older appliances like my water heater, the coverage provides good protection should it need replacing soon."

"I have been disappointed with my home warranty. Many claims were denied for being pre-existing conditions and the approved repairs have required a lot of out-of-pocket costs anyway between service fees and deductibles."

"For my rental property, the warranty has been 100% worth it. Being able to have repairs and replacements done for just my deductible has saved me thousands over the years on tenant appliance breakdowns."

"It's nice having the warranty as a backstop, but I feel like we waste hundreds per year on the premium since we haven't had any major issues. It provides some peace of mind though."

As you can see, experiences vary greatly. Home warranties can provide financial protection but may also deny claims. Carefully weigh the costs versus risks on your specific home.

What Does a Home Warranty Cover? #

A home warranty typically covers repairs and replacements for these types of home systems and appliances:

  • HVAC system - Furnace, air conditioner, heat pump

  • Plumbing system - Faucets, pipes, water heater

  • Electrical system - Wiring, outlets, circuit breaker panel

  • Appliances - Refrigerator, dishwasher, oven, washer/dryer

  • Roof leak repair - Repairing leaks in roof structure

  • Ceiling fans - Fan motor and remote control

  • Garbage disposal - Entire unit including motor

  • Water softener - Entire unit including brine tank

  • Pool/spa equipment - Pumps, motors, heaters

  • Septic system - Pumping, main lines, tank

Coverage is not as comprehensive as homeowners insurance. Damage from disasters, floods, pests is not included. Optional add-ons expand coverage.

Common Home Warranty Claim Denials #

Home warranty providers often deny claims for certain situations including:

  • Pre-existing conditions - Issues that occurred before coverage or were visible at initial inspection.

  • Improper maintenance - Failures due to lack of maintenance or negligence.

  • Uncovered items - Systems not included in the coverage plan purchased.

  • Unauthorized repairs - Using a non-approved contractor voids reimbursement.

  • Cosmetic damage - Defects that are only cosmetic get denied.

  • Code violations - Upgrades to meet code requirements won't be covered.

  • Mismatched units - Replacement components must match existing units.

  • Normal wear and tear - Gradual deterioration from use and age is excluded.

  • Overloaded equipment - Failures due to overuse or improper sizing are excluded.

  • Disasters - Damage from floods, fires, storms is not covered.

Carefully reviewing policy terms, inclusions, and exclusions helps avoid frustration from denied claims. Also research provider reputation.

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