What Is A Home Protection Plan And Which Plans Are Best?
Most homeowners understand the importance of the operation of essential home systems and appliances. But for many, when this equipment breaks down, money may not be in the budget to make a quick repair. Fortunately, a home protection plan can be obtained to lessen the financial responsibility when appliances break down.
Typically, home warranty companies offer varying levels of protection regarding which appliances in a home are covered. Of course, the higher-tiered plans will cost more. Still, other than the required fees that are expected, homeowners are better protected from unforeseen expenses. In addition to a contract premium, interested customers must understand additional costs associated with home warranty plans.
Our team of dedicated researchers will share the ins and outs of home warranty companies, so you can make an informed decision before buying coverage. In this article, we provide an unbiased overview of what you should expect when acquiring home protection. It's common for these policies to be introduced during a real estate transaction, but for current homeowners, the benefits are just as valuable.
What Is A Home Protection Plan?
A home protection plan, or home warranty, is typically purchased as a one-year service contract that covers the costs of repair or replacements for home systems and appliances. Policyholders are granted peace of mind that problems caused by wear and tear are repaired swiftly, and without disrupting their budget.
During a real estate transaction, a service contract is commonly offered as an incentive for a buyer. It ensures that someone who is buying a home receives financial assistance when an appliance breaks down. Home warranty plans are an efficient companion for households with aging home systems and appliances, especially when you're unsure about their maintenance history.
Home warranty plans are also efficient in keeping homeowners safe by avoiding DIY repairs. Attempting to perform repairs on things like an electrical system or appliance may result in dangerous consequences like home fires or irreversible damage to the equipment. With home warranty protection, policyholders benefit from hiring affordable and qualified technicians to service their home systems and appliances with expertise.
What Do Home Protection Plans Cover?
Home warranties cover components that are necessary to the optimal performance of the equipment included in a service contract. While policies will vary based on the provider, generally, an agreement ensures the operation of multiple machines found in most homes.
Typically, these appliances and systems are covered in most home warranty plans.
- Heating and air units
- Water heaters
- Plumbing systems
- Electrical systems
- Permanently installed dishwasher and microwave
- Ductwork and exhaust fans
- Oven, range, and stove
- Washer and dryer
- Garbage disposal
- Plumbing stoppages
The structure of home services warranty plans can differentiate between providers. For instance, Choice Home Warranty offers comprehensive coverage for the entire home in its Total plan. On the other hand, the company Amazon Home Warranty (AHW) separates its packages into Systems and Appliances, but bundles them both into a combo plan.
Home warranty companies also offer more customization by allowing policyholders to buy coverage for optional add-ons to their contracts. Typical options included in this type of warranty include:
- Swimming pool equipment
- Spa and hot tubs
- Sump pump
- Freestanding ice maker
- Additional refrigeration units
- Roof leak protection
Purchasing special protection under a home services add-on plan will increase your annual premium. But, if you own home systems and appliances that are considered optional, contemplate if your budget can withstand an expensive breakdown.
Can a Home Protection Plan Replace Homeowners Insurance?
No, a home protection plan policy differs from homeowners insurance, which is necessary to protect the property and personal belongings from incidents including fire, theft, and storm damage.
- Situation: A fallen tree caused extensive damage to your primary dwelling. (Not covered by a Home Protection Plan v. covered by Homeowners Insurance)
- Situation: The compressor or heat pump failed within a heating or air conditioning system. (Covered by a Home Protection Plan v. not covered by Homeowners Insurance)
- Situation: Lightning caused a power surge that damaged an appliance or home system beyond repair. (Not covered by a Home Protection Plan v. covered by Homeowners Insurance)
- Situation: Mechanical failures have caused a refrigerator to cool inefficiently. (Covered by a Home Protection Plan v. not covered by Homeowners Insurance)
While home warranty plans are no replacement for homeowners insurance, each policy serves a specific role that benefits homeowners. Obtaining both types of coverage is an effective strategy to maximize ultimate budget protection.
What Do Home Protection Plans Not Cover?
Before buying a home protection plan, you should know that not all types of breakdowns are covered. Reputable home warranty companies are transparent about their limitations and eligible repairs. Again, the best way to discover the extent of the protection you are purchasing is to review the company's terms and conditions.
Companies like Choice Home Warranty and American Home Shield provide interested consumers with access to a sample contract. We suggest reviewing available documents before investing in a service that may not perform to your expectations.
As a general rule, home warranty companies don't cover the expenses of repair or replacement for appliances with pre-existing conditions. In many cases, a provider institutes a 30-day waiting period after a contract is purchased, to protect themselves from fraudulent claims.
Cosmetic components are also often excluded. That means replacing parts like drawer rollers, knobs, buttons, and appliance handles are the responsibility of the homeowner.
How Much Does a Home Protection Plan Cost?
The cost of a home warranty will vary dramatically depending on the company and coverage level you choose. Factors like your location, the selected plan, and service fees are all costs you should consider.
What's the Price of a Contract?
The most expensive expense required to obtain home warranty plans is the annual premium. Generally, a 12-month home warranty contract cost will range between $300–$600 and covers over $20,000 worth of home systems and appliances. The lower costs are usually considered basic plans, while the more expensive packages offer more comprehensive coverage throughout the home.
While some home warranty companies require policyholders to pay for a policy upfront, others allow customers to pay for their contracts in monthly payments, meaning the average would only cost $25–$50.
If you require additional coverage for optional add-ons, you should expect your annual premium to increase. Compare the monthly payment with the coverage caps offered by home warranty companies to ensure you're making a valuable decision.
Another charge that's necessary while holding home warranty plans is a company's service fees. Essentially, this expense is the homeowner's responsibility and should be paid to a technician once they arrive on-site to attend to mechanical failures.
Throughout the industry, we found the average cost of service fees to fall between $60–$125 per incident, based on quotes we have reviewed. When choosing between home warranty companies, analyze the terms and conditions for the policy regarding re-repairs for the same issue. Many offer a warranty on the parts and labor performed to home systems and appliances.
Are Home Protection Plans Worth It?
For homeowners on a budget, a home protection plan is an excellent policy to own. Customers can plan for unforeseen breakdowns by investing a portion of their savings to cover service fees and their premium costs.
Home warranty plans are also efficient protection in older homes with aging equipment. Make sure your provider doesn't disqualify home systems and appliances based on their age. Use this helpful guide from the International Association of Certified Home Inspectors to determine how much life remains in the equipment you rely on most.
To understand the benefits of owning a home protection plan when a vital system breaks down, check out these average repair and replacement costs. When a warranty is in place, your financial responsibility is limited to the service fee required by a provider; typically $75–$125.
- Heating System: $285 (cost to repair) v. $4,249 (cost to replace)
- Air conditioner: $347 (cost to repair) v. $5,413 (cost to replace)
- Electrical system: $317 (cost to repair) v. $1,287 (cost to replace)
- Water heater: $546 (cost to repair) v. $1,065 (cost to replace)
Before agreeing to a contract, you must understand the terms and conditions set forth by home warranty companies. Make sure you are knowledgeable about coverage caps that may limit the amount of financial assistance you receive when an appliance requires repair or replacement.
For example, consider your furnace breaks down to the point where replacing the system is necessary. The national average of purchasing a new system is between $2,150–$5,900, with most homeowners paying about $3,100. Next, imagine a home protection plan that offers protection up to $2,000.
Rather than paying the full cost of $3,100, you're only required to cover the expenses that exceed the maximum allowed, service fees, and your annual contract. If we use the higher end of industry standards for this equation—$125 service fee, and $50 premium—your financial responsibility is only $1,275 to install a brand-new furnace.
It's comprehensive coverage that protects budgets from mechanical failures caused by regular wear and tear. When your home systems and appliances inevitably break down, a home protection plan can provide financial relief.
Best Overall Provider: American Home Shield
We rate American Home Shield as the Best Overall.
AHS has proven to hold the top spot according to our research team due to these highly valuable perks as a home warranty provider:
- Three plan options. Customers can choose between the ShieldSilver™ Plan for coverage on just systems, or the ShieldGold™ and ShieldPlatinum™ plans for total coverage on a combination of 23 systems and appliances.
- Choose your service fee. Based on the monthly premium you select, you can adjust the amount you'll pay at the time of service.
- Fast service request response: AHS assigns professionals to a customer's service request within the first 24 hours 98% of the time.
- Strong reputation:
- Founded the home warranty industry and is the oldest home warranty company
- 2019 America's Best Midsize Employers Award by Forbes
- 2014–2015 Women's Choice Award
- 2014 Home Warranty Awards "Best in Service" Award
Best Basic Plan: Choice Home Warranty
We rate Choice Home Warranty as the Best Basic Plan in the home warranty industry.
Choice Home Warranty offers two primary tiers of coverage. The Choice Basic Plan covers multiple major appliances and home systems. The Total Plan covers everything in the Basic plan, plus some additional systems and appliances.
One of the biggest selling points for Choice Home Warranty is their simple, down-to-earth pricing for all the home protection you need and more. The quote process is quick and easy to navigate, and you can have a quote within two minutes through their basic online form. Our team got a sample quote directly from Choice Home Warranty for an address in Georgia, zip code 30097, and we received the following:
- Basic plan: $41.25 (monthly premium), 85 (service fee)
- Total plan: $50 (monthly premium), 85 (service fee)
Choosing a home warranty company is a major decision because your peace of mind depends on it. Our research team recommends American Home Shield as Best Overall and Choice Home Warranty as the Best Basic Plan. As always, we recommend that you request quotes from multiple providers and read all of the fine print first before making a decision.