ARE HOME WARRANTIES WORTH IT?
August 14, 2020
What are the pros and cons of owning a home warranty? Our review team discusses whether or not home warranties are worth it | Photo Credit: Shutterstock © Ewelina Wachala
With the high cost of home repairs, many homeowners want to know whether a home warranty is worth it or not. Before making a decision, it is important for homeowners to examine this question carefully, considering both the advantages and the disadvantages of a home warranty.
In this article, our review team helps you make a decision on a home warranty by discussing factors to consider such as the cost of home repairs, the pros and cons of a home warranty and the cost of a home warranty. We will also provide our own take on this question.
What Is a Home Warranty?
In order to maintain a home, a number of complex, expensive systems and appliances have to function smoothly. A home warranty is a service contract designed to protect you from costly repairs or replacements for these systems and appliances that you cannot pay out of pocket.
With a home warranty, you pay a relatively small monthly premium and a service call fee every time you need a repair or replacement. Similar to health insurance, you pay your monthly premium every month regardless of whether you need repairs. When you do need repairs, you pay a service call fee for each repair visit.
The best home warranty companies operate 24/7 customer service centers and have a repair person contact you within 48 hours of submitting a claim. These companies also offer emergency services for certain appliances and systems.
Millions of homeowners purchase a home warranty because of the peace of mind that comes with their warranty. There may be several months every year when their home warranty is not needed, but when it is, it tends to save them a considerable amount of money and stress.
What Do Home Repairs and Replacements Cost?
The cost of a home repair is highly dependent on the specific system or appliance that breaks down in your home and whether it needs to be repaired or replaced. The table below reveals the cost of repairing and replacing some common household items, according to House Method. As you can see, replacements and repairs are not cheap.
For example, paying to replace your air conditioning system usually costs over $5,400. The vast majority of Americans do not have the money to replace their air conditioning system if it breaks down in their home, and that’s just one of the many expensive systems and appliances in a house.
| Cost of Home Repairs and Replacements | Cost to repair | Cost to replace |
| Heating system | $285 | $4,249 |
| Air conditioner | $347 | $5,413 |
| Plumbing system & stoppage | $305 | $1,038 |
| Sewer line | $2,560 | $2,892 |
| Electrical system | $317 | $1,287 |
| Water heater | $546 | $1,065 |
| Refrigerator | $310 | $1,925 |
| Oven/range/stove/cooktop | $150 | $1,675 |
| Clothes washer | $310 | $1,250 |
| Clothes dryer | $250 | $1,075 |
What Is the Cost of a Home Warranty?
The cost of a home warranty depends on a variety of factors, including the provider you purchase your warranty from and the specific home warranty plan you purchase. We reached out for sample quotes from three of the best home warranty companies in the industry. You can find their respective costs in the table below.
The cost of your home warranty may differ slightly based on your location or the size of your property. As you consider these companies for your home warranty needs, also consider factors such as each company’s state availability, quotes and claims processes, breadth of coverage in each plan and customer service.
| Cost of a Home Warranty | Superlative | Monthly Premium Cost | Service Call Fee |
| #1: American Home Shield Get free quote |
Best Overall | Appliance plan: $49.99 per month Systems plan: $49.99 per month Combo plan: $59.99 per month Build your own: $54.99 per month |
$75 – $125 (the higher the service fee, the lower the monthly cost and vice versa) |
| #2: Choice Home Warranty Get free quote |
Best for Aging Homes | Basic plan: $36.17 per month Total plan: $43.85 per month |
$85 |
| #3: Select Home Warranty Get free quote |
Best for Value Shoppers | Bronze plan: $35.83 per month Gold plan: $35.83 per month Platinum plan: $37.50 per month |
$75 |
Pros and Cons of a Home Warranty
Now that you have a basic understanding of the value of a home warranty and its cost, it’s time to take a look at the pros and cons of a home warranty. We hope the table below will make it easier for you to make your decision on whether or not a home warranty is worth it for you.
As you review the various pros and cons, consider whether any of these pros or cons are especially relevant to you and your needs or preferences.
| Pros of a Home Warranty | Peace of mind: A home warranty gives you peace of mind that your systems and appliances will be covered when they break down or need repairs. Financial stability: A home warranty provides financial stability when your systems or appliances break down. Network of professional service providers: You will have access to a network of experienced, licensed service providers for all of your systems and appliances, saving you the time of finding professional contractors for each of your needed repairs. Convenience: You will only need to save one phone number or bookmark one webpage in order to file a claim on any appliance or system in your home. |
| Cons of a Home Warranty | Ability to pick your service technician: You may not be able to pick your favorite service technician, if you have one. Exclusions: Some parts of certain appliances or systems may not be covered. These exclusions are detailed on a home warranty contract. Potential claim denial: If your system or appliance is being improperly maintained, your home warranty company may not cover it. These reasons for claim denial are also typically listed on a home warranty contract. Long-term cost: Because home warranty companies have to make a profit, you will probably pay more money in the long run by having a home warranty. |
Is a Home Warranty Worth It for Me?
Whether a home warranty is worth it for you is a personal decision and there is no right or wrong answer. That being said, our review team does believe that purchasing a home warranty from a reputable company tends to have more pros than cons for most people.
The vast majority of Americans do not have thousands of dollars saved for unexpected repairs to their home. Without a home warranty, many needed home repairs or replacements can cause financial instability. This includes most people and families even in the middle class.
If you do have a very large amount of savings or a very large amount of income, a home warranty is probably not needed. You can simply pay for your repairs or replacements in cash, which might save you money in the long run.
Recommended Provider: American Home Shield
For those who have decided a home warranty may be worth it for them, we think American Home Shield (AHS) is a great choice. We ranked the company as the top provider in the industry after reviewing over 20 home warranty companies on several important home warranty criteria. These criteria include the providers’ coverage plans, cost, quotes and claims processes, and customer service.
Here are the reasons AHS came out on top:
- First and most popular home warranty business: The first home warranty company in the market, almost one out of every two home warranty customers buys an AHS policy. The company is also a six-time defending champion of the Women’s Choice Award for the best home warranty and received high ratings by This Old House and House Method.
- 24/7 Claims and Customer Service: AHS operates a 24/7 customer service line and responds to claims within 24 hours 98% of the time, which is much quicker than many other home warranty companies.
- Build-Your-Own plan: AHS offers a Build-Your-Own plan, which lets you cover the systems and appliances that are most important to you.
Conclusion
Whether a home warranty is worth it or not for you depends on your personal situation and life goals. Millions of homeowners buy a home warranty for the peace of mind and financial stability it brings to themselves and their family. Similar to paying every month for health insurance, you might pay more in the long run to own a home warranty than to not have one, but many homeowners find that the benefits are well worth the cost.
