Are Home Warranties Worth It?

The short answer: sometimes. They can help with unexpected expenses from a broken appliance, but they’re not worth it for everyone.

Written by Andrew Pentis / May 2, 2022

Quick Bites

  • Home warranties, which cover repair or replacement of your home’s appliances, cost $500 to $550 on average per year.
  • Unlike home insurance, warranties don’t cover major structures such as your roof, but you may pick and choose your coverage level depending on your needs.
  • Though they can protect you from a surprise blow to your budget, there’s typically a lot of fine print to be aware of.
  • If you decide to purchase a home warranty, shopping around can ensure you get the right level of coverage.

When poring through all the closing costs to buy a home, or maintaining the one you already own, you might not be thrilled about the idea of plunking down another $500 or more for a home warranty. Fortunately, figuring out whether home warranties are worth it is a simpler exercise than most other homeowner to-do’s.

Home warranties help you “service, repair or replace home appliances that fail after wear and tear” without incurring a surprise expense, says Art Chartrand, a founder and current legal counsel of the National Home Service Contract Association (NHSCA), a trade organization that vets warranty providers. Home warranties are separate from home insurance, which protects permanent structures like your roof.

You might decide a home warranty is worth it if you’re buying (or already own) a house with a fridge almost on the fritz or an air conditioning unit that is clearly past its prime. A warranty might also serve as a cushion for your budget if your emergency savings need to be replenished.

On the other hand, home warranties—or certain types of coverage within them—might not be worth it in some scenarios. Besides the potential headaches of filing a claim, the cost of fixing or replacing an appliance or two yourself may not be that different from the cost of the warranty.

Inside this article

  1. How much home warranties cost
  2. What home warranties cover
  3. Is a home warranty worth it?
  4. How to shop for a home warranty

How much home warranties cost

Unfortunately, they’re not free. Home warranties are optional service contracts at a charge that often burden the prospective homebuyer, at least in a seller’s housing market. (An exception to that rule is with so-called builder warranties, where the builders of new construction often foot the bill for more permanent aspects of the home, such as plumbing.)[1]

Chartrand says standard warranties typically cost $500 to $550 per year. But the cost can vary widely depending on your home state and preferred level of coverage.

He estimates that about two-thirds of home warranties are bought and sold in conjunction with a home purchase. The other third are “direct sales,” where homeowners elect to buy a warranty on their own.

“You can tailor your coverage to meet your needs,” Chartrand adds. “There might be a gold, silver or platinum program, and it depends on consumer demand.”

You might decrease your coverage level if your spouse is an HVAC technician, for example, and they can service the equipment. However, you might increase your amount of coverage if you live in the countryside and want to cover a septic tank or water well that is typically excluded from standard warranties.

Though home warranties call for an up-front payment or monthly payment plan, watch out for other charges. There might be additional fees for shipping replacement parts or appliances or for labor-intensive repair or installation.

Like with health insurance, the cost of your home warranty also changes based on these out-of-pocket costs. If an appliance breaks, lower-cost home warranties might force you to pay $75 for the labor of the repair; a higher-cost home warranty might have, say, a $60 service charge.

What home warranties cover and don’t cover

Home warranties don’t last forever, and they don’t cover every potential mishap to your appliances. Typically spanning one year, these are service agreements with fine print. They should list out the appliances (like your stove) and, in some cases, home systems (such as electrical) that are covered.

If your oven stops warming, for example, your service contract might cover repairs, not a replacement. And even if it does cover a replacement, it might have a limit on the brand or value of the new model it will cover.[2]

Typically covered by basic home warrantiesTypically not covered by basic home warranties[2]
Kitchen appliances like your fridge and freezer, stove and dishwasher; other household appliances such as your washer and dryer; basic home systems such as your heating and air conditioning unitsChimney, fire or wind damage, furnace, pool, plumbing, roof, water heater, well pump, windows

Chartrand says it’s common for consumers to think something is covered when it’s not. Your second fridge in the garage, for example, won’t be covered unless you include it in your warranty. Ice makers, which can be expensive to fix or replace, often go uncovered, too. However, Chartrand adds, you might be surprised to learn that your home warranty covers more items than you think, such as faucets and light fixtures.

Is a home warranty worth it?

Chartrand has 35 years of experience in the world of service contracts, but he also has personal experience about the worth of getting a home warranty—particularly for his home’s electrical system. One day, his property’s main electrical panel shorted after normal wear and tear. His warranty allowed him to get it replaced at a fraction of the cost of hiring an electrician independently.

“You never take out an insurance policy hoping your home is going to burn down,” Chartrand says. “Same thing with a service contract: You don’t take one out hoping the appliances break. But it helps you keep a level budget.”

Reasons it might be worth it to get a home warrantyReasons it might not be worth it to get full coverage or a warranty at all
If your savings were exhausted to buy or remodel your home.Major appliances are already covered by manufacturer warranties, by your credit card issuer or by a new builder warranty (in the case of new homes).
Budget protection, as you’re less likely to face a surprise expense if a covered appliance breaks down.The cost of a warranty approaches or trumps the cost of replacing an appliance that you’re most worried about, particularly if you account for warranties that cap claims at a certain value.
Covering repairs that seem inevitable in the case of owning an older home or long-held appliances.If an appliance is already not functioning or was clearly not maintained properly in the past, it could make it ineligible for warranty coverage.
Peace of mind, knowing that a covered appliance will be fixed if it stops functioning.You have a go-to contractor (who is licensed) who charges low rates for minor repairs, or you’re a contractor yourself and can fix some or all of the appliances typically included in home warranties.
Having a place in line for repairs or routine maintenance, such as with HVAC units that need service in summer or winter months.You have the cash and desire to replace certain appliances as they age, as opposed to getting them fixed.

Be aware that making a claim on a home warranty will likely require some legwork on your part. You’ll have to document the problem, contact the warranty provider and fulfill their claim requirements. Claims are typically judged on a case-by-case basis, with your documentation in one hand and the service agreement in the other. There’s certainly no guarantee you’d gain approval.

Tip: After you have agreed on a purchase price for a home, you typically have the opportunity to hire a home inspector who furnishes a detailed report about the condition of the property and everything inside of it. Your inspector can help you estimate the age and lifespan of any existing appliances; you can also reference the Inter­national Association of Certified Home Inspectors’ life expectancy charts.

How to shop for a home warranty

If you’re shopping around independently, remember that home warranties (like other financial products) are ripe for scams, or at least misleading marketing. You might be told about a “comprehensive” warranty, for example, only to find that it has as much limiting language as competing products.

You can avoid bad-acting warranty companies by relying on people you trust and putting in your own research. Your real estate agent or neighbors might know of a reputable home warranty provider, but double-check with other customers or look up online reviews and complaints. See if consumers have had trouble being approved for claims.

A good starting point is Chartrand’s nonprofit trade organization, which has member warranty providers. Chartrand recommends asking providers you come across if they’re NHSCA members, which holds them to certain guidelines. You can also check up on a provider with your state’s consumer protection office.

Questions to ask before buying a home warranty[3]
How long does the warranty last?
What appliances are covered?
Are replacements covered, or only repairs?
Is there a deductible?
Is there a cap on the value of claims?
Are there extra fees for labor, installation or shipment?
Can I choose my own contractor for the required work?
What is the fine print about warranty exclusions?
Article Sources
  1. “Warranties for New Homes,” Federal Trade Commission, https://consumer.ftc.gov/articles/warranties-new-homes.
  2. “Consumer Alert: Home Warranties,” Office of the Attorney General for the District of Columbia, https://oag.dc.gov/consumer-protection/consumer-alert-home-warranties.
  3. “Warranties,” Federal Trade Commission, https://consumer.ftc.gov/articles/warranties#written.

About the Author

Staff editor Andrew Pentis headshot

Andrew Pentis

I have used my journalism background to write about personal finance topics since 2015. My work has appeared in over 40 publications, including LifeHacker, U.S. News & World Report and Marketwatch.

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