How to decide whether a home warranty is worth it
A home warranty is worth it only if the repairs it pays for will beat the yearly price plus a fee on every visit. Plans run about $564 to $984 a year, with visit fees near $75 to $125. Payout caps and exclusions decide most of the value, so read the contract first.
What does a home warranty cover?
Despite the name, this product is a service contract. The FTC describes it that way: you pay for a set term, and the company arranges repair or replacement of listed appliances and home systems when they break. It is separate from a builder's warranty on a new house and from the warranty that came with your dishwasher.
Plans usually come in three shapes. A systems plan covers things like HVAC, ductwork, electrical, plumbing and water heaters. An appliance plan covers the refrigerator, dishwasher, range, washer, dryer and garage door opener. A combination plan covers both. Pools, spas, well pumps and septic systems are usually paid add-ons.
Is a home warranty worth it before you close?
Make the call while you are still negotiating, because a seller can agree to pay for the first year. If you are buying on your own, there is no rush at closing. Coverage typically begins about 30 days after your first payment, so a plan bought the week something fails won't help with that failure.
Home warranty cost over a year, with visit fees
This Old House puts plans at about $564 to $984 a year and service fees at about $75 to $125 a visit. You pay that fee to the technician every time, even for a small fix. Here is what a year costs at both ends of those ranges.
| Service visits in a year | Low plan ($564 + $75 per visit) | High plan ($984 + $125 per visit) |
|---|---|---|
| 0 | $564 | $984 |
| 2 | $714 | $1,234 |
| 4 | $864 | $1,484 |
The plan pays off only if the repairs would have cost more than that total. Caps can cut into the savings. A $2,000 limit on electrical work, for example, leaves you paying everything above $2,000. One provider lists $3,000 limits on most items, and a cap often assumes a repair, so a full replacement can leave you owing the difference.
How to decide: is a home warranty worth it for your house?
- Ask who is paying
Find out if the seller will fund the first year. If so, get the plan name and the contract, because a free plan still has visit fees and caps.
- List what is already covered
Write down appliance and system ages, any manufacturer warranties, and any builder warranty. Anything still under warranty adds little to a plan.
- Read the full contract
Mark the visit fee, the cap for each system, the exclusions, the start date and the cancellation terms. A sales page won't show you all of these.
- Run the math for your house
Add the yearly price to two to four visit fees. Compare that with what you could realistically face from your oldest system, up to the cap.
- Check the company
Search its name with the words review and complaint, then check with your state consumer office. Look for slow payment and disputes over repair versus replace.
- Decide and keep the paperwork
If you buy, save the contract and claims number with your house records, and note the renewal date.
Home warranty coverage and company rules by state
There's no single federal rulebook for home warranty companies. Each state sets its own approach. Some require a license, some only ask for registration, and some do little at all. Check your state consumer protection office or insurance department to see which applies, and whether the company is allowed to sell there.
Home warranty exclusions and traps to watch for
- Exclusions for rust, corrosion, poor maintenance, improper installation and accidental damage. These are common reasons an older system falls outside a plan, so keep service records.
- Pre-existing conditions. Many plans refuse them, while at least one large provider says it covers known and unknown ones. Get the wording in writing.
- Paying twice. The FTC warns that a plan can duplicate coverage you already have, or cover only part of a product.
- Cancellation fees and limits, plus a slow claims process. A claim that takes weeks is worth less than one that takes days.
- Unwanted calls and urgent mailers selling these contracts. They may be after your money or personal details. Don't buy on the spot.
What homeowners say about whether a home warranty is worth it
If the seller is paying for a warranty, check what it includes. One owner's plan covered a locksmith visit that rekeyed every lock. (Reddit)
Owners are split. Several say the companies argued claims, sent the cheapest fix again and again, and used contractors from hours away. A few who were short on cash say one paid off. The common middle ground is to put the premium into a savings fund instead. (Personal Finance Stack Exchange, Hacker News)
If the seller includes a warranty, test everything right away, including the AC in winter and the heat in summer, so problems are on record while you're covered. (Hacker News)
Where owners disagree: Most owners and finance-forum regulars say they're a poor deal: claims get argued, the cheapest repair is tried first, and network contractors can be far away or slow. A minority who were short on cash say a plan paid for itself. The usual advice is to self-insure with a repair fund, and test everything immediately if a seller throws one in. (Personal Finance Stack Exchange, Hacker News)
Home warranty vs homeowners insurance and other questions
Is a home warranty the same as homeowners insurance?
No. A home warranty is a service contract for repairing listed appliances and systems. It doesn't replace your homeowners policy, and the rules for warranty companies vary by state.
Does a home warranty cover old appliances?
Often yes, if the item is working when coverage starts and fails from normal wear. Rust, corrosion, poor maintenance and pre-existing conditions are common exclusions, so age can still lead to a denied claim.
When does a home warranty start?
Coverage typically starts about 30 days after your first payment. Seller-paid plans can differ, so check the start date in the contract.
Sources: FTC, This Old House
General guidance for U.S. homes, not professional advice. For gas, electrical and structural work, call a licensed pro.