Are Home Warranties Worth It?

Home warranties are worth it if you aren’t financially prepared for unpredictable repairs and replacements for your most-used appliances and home systems. When we surveyed 1,000 homeowners in 2021, we found that more than 74% of respondents had spent at least $400 on a home repair, and 27% of these homeowners spent more than $1,000 on a repair. Home warranties can help defray these expenses and give you peace of mind. According to House Method’s analysis of the average cost of a home warranty in every state, the annual price of a plan generally falls in the range of $600-$800 no matter where you live, making it likely that you will come out ahead if you unexpectedly need to repair or replace a major system or appliance.

However, if you have a significant financial nest egg set aside for home repairs or your appliances and systems are protected by manufacturers’ or installation warranties, a home warranty isn’t going to be worth it for you. Home warranty contracts stipulate that any item currently covered by another warranty is not covered.

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How Do Home Warranties Work?

When a home system or major appliance breaks down due to normal wear and tear, you can call your home warranty company to file a claim or submit a service request online. Your company will respond to your service request within a specified timeframe, which is typically less than 48 hours. If a contractor can’t be located within this time frame, the company may allow you to choose an approved contractor of your choice.

After the company responds to your request, it will forward your claim to an approved contractor who will schedule with you directly. At this initial visit, the technician will access, diagnose, and determine whether the malfunction is the result of a covered issue. Minor repairs will typically be completed during this initial visit if the claim is approved, while other repairs or replacements may require an additional visit to order the necessary parts.

It’s typical for home warranty companies to offer at least a 30-day workmanship guarantee after they’ve completed a covered repair. This guarantee means your contractor will assess the issue and provide service without an additional service charge if the item breaks down again after the initial repair.

Learn More: How Does A Home Warranty Work?

How Are Home Warranties Regulated?

Each state regulates home warranty and service contract licensure independently. For example, in Texas, the Department of Licensing and Regulation handles service contracts, whereas in Arizona, home warranties are regulated by the Consumer Protection Division of the Department of Insurance. According to Meenan, some states, such as Pennsylvania, have a more hands-off approach, whereas states such as Florida and California can be more difficult for new providers to get licensed.

Many states do have similar rules based on the Service Contract Model Act that the SCIC and the National Association of Insurance Commissioners (NAIC) promoted to state legislatures. Since 1988, the SCIC has worked to promote industry regulation nationwide. Regulation provides assurance that you can trust that your home warranty provider is financially sound and can follow through on its promises. State regulations also ensure various consumer protections, such as these measures:

• Contracts that are clear and use easy-to-read print
• Extensive disclosures of what is covered and excluded
• The ability to cancel and receive a full refund within a certain time period (typically 30 to 45 days)

While you’re shopping for a home warranty policy, it’s a good idea to check with your state’s regulatory body to confirm the provider is licensed to operate in your state. You can also read through a sample contract, many of which have state-specific clauses that clarify the protections and exclusions you are subject to.

What Do Home Warranties Cover?

Typically, a home warranty plan covers the repair, service, or replacement of major home systems and appliances. However, many companies split coverage options into systems plans, appliance plans, and combination plans.

The most common systems and appliances covered under home warranty plans include these:

• Air conditioning
• Built-in microwaves
• Clothes dryers
• Clothes washers
• Dishwashers
• Ductwork
• Electrical
• Garbage disposals
• Heating system
• Ovens
• Plumbing
• Refrigerators
• Water heaters

Learn More: What Does a Home Warranty Cover?

What Do Home Warranties Typically Not Cover?

Home warranties typically do not cover built-in systems and appliances that have been modified incorrectly or improperly installed or that suffer malfunctions as a result of neglect, misuse, accidental damage, or an “act of God.” It’s important to read service contracts carefully because the terms can vary considerably.

As a general rule, home warranties do not cover structural elements. Home warranties also don’t cover any item that’s protected by a manufacturer’s warranty, such as a Samsung warranty.

How Much Does a Home Warranty Cost?

A home warranty typically costs $465 to $760 per year, according to quotes we’ve requested from providers across the nation. It’s important to factor in service fees when determining the price of your home warranty. These charges are an added cost each time your home needs repairs and replacements. The range of service call fees typically falls within $65 to $125.

According to our research on more than 57 home warranty companies, only 12 home warranty companies allow you to choose your own service call fee. Lower service fees can make your monthly fees more expensive, which is an important consideration if you plan on making several service requests throughout your home warranty term. However, if you choose a higher service fee, your monthly cost will likely be lower. Just remember that when you choose a high service fee, you’ll pay more for a technician’s visit.

Learn More: How Much Does a Home Warranty Cost?

What Are Common Home Warranty Complaints?

In reading thousands of third-party customer reviews, we have learned these are some of the common home warranty complaints:

• Slow or refused claims payouts
• Inexperienced technicians
• Long wait times for replacements on appliances or parts
• Unclear coverage limits
• Slow responses to complaints

These traits are the hallmarks of poor service from a home warranty and are certainly not true for every provider on the market. We recommend that you ask questions about policies on claims, wait times, and coverage limits before buying to be sure you are aware of your home warranty company’s terms.

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