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Buying a home is often the most significant investment someone makes in their lifetime. When considering down payments, homeowners insurance, and expensive breakdowns—the actual cost of a home is far more extensive than just the asking price for the property. 

Fortunately, when homeowners buy a home warranty, they have extra support to shoulder the costs of unexpected repairs on home systems and appliances. However, with numerous companies claiming to offer the best protection, finding the right coverage can be challenging when comparing cost versus value.

You can make an informed decision by understanding additional fees, policies regarding repairs or replacements, and which systems qualify under a home warranty contract. You should also familiarize yourself with how to make a claim and a timeframe of when to expect service. 

In This Article:

 

In this article, our unbiased researchers will provide an overview of home warranty costs. We will cover home warranty plans and compare coverage options, while explaining why we decided that American Home Shield is the best overall option. 

American Home Shield offers peace of mind that your belongings are covered after breakdowns and they provide exceptional customer service. With four plans to choose from, policyholders receive efficient protection to ensure their expensive systems and appliances are in working condition.

Get A Free Quote from American Home Shield

 

What Is A Home Warranty?

A home warranty covers most parts and labor costs for repairs or replacements of appliances that are protected under a contract. Homeowners can purchase this additional coverage to protect their budgets from unexpected and often expensive repairs. 

What Does A Home Warranty Usually Cover?

Unlike homeowners insurance, a home warranty company covers wear and tear for systems and appliances within the home, not the structural integrity of a property. Before signing a service contract, make sure it offers protection for your specific needs as many home warranty plans provide numerous levels of coverage. 

Typical systems and appliances that are covered include: 

  • Essential equipment relating to plumbing and electrical. 
  • Heating and air units, often including water heaters. 
  • Washing machines and dryers. 
  • Appliances found in the kitchen, like garbage disposals, built-in microwaves, ovens, and refrigerators. 

When weighing options between different optional insurance plans, analyze a sample contract to gain real knowledge of the home systems the warranty covers, and its limitations. 

When Do You Need a Warranty?

Owners of homes of all shapes, sizes, and ages can benefit from the protection of a home warranty contract. Policies may be acquired at any time during homeownership, but are generally purchased for a one-year agreement. 

A home warranty contract plays a significant role in motivation for real estate agents, home buyers, and sellers. According to the National Home Service Contract Association, the majority of home warranty plans are offered during real estate transactions. However, direct sales to policyholders do account for one-third of all service contract sales. 

What is the Difference Between a Home Warranty and Home Insurance?

The Insurance Information Institute defines homeowners insurance as “financial protection in the event of a disaster or accident involving your home.” Policies are in place to offer financial relief due to instances like fire, theft, storm damage, and physical injuries on the property. Homeowners insurance is mandatory.

On the other hand, a home warranty covers home systems and appliances and is entirely optional. Homeowners are offered peace of mind that financial assistance will be provided due to an unexpected breakdown of covered equipment. 

For ultimate protection to the structure of a home and its expensive equipment inside, acquiring both types of policies is efficient budget protection. 

How Much Does a Home Warranty Cost?

To understand the average cost of a home warranty contract, one must know their responsibilities. Typically, policyholders pay a monthly or annual premium, a service fee for repair technicians, and some companies also require a one-time enrollment fee. 

Home Warranty Cost Structure

When developing a financial plan, it’s essential to factor in each cost required by the home warranty company of your choice. Here is more information on what you should expect. 

Contract Premium

While each home warranty cost can vary dramatically based on the extent of coverage, and the company which offers protection, you should expect an average premium anywhere between $300-$804. You may not be required to cover the entire yearly premium upfront as some providers offer a monthly payment plan, resulting in an average of $25–$50 per month. 

Service Fees

Each home warranty company requires policyholders to pay a deductible, or service fee, to a service technician when a repair is needed. This non-refundable charge typically ranges between $75–$125 depending on the provider. 

Your responsibility for these charges can be found in a home warranty contract. In instances when a resolved repair that suddenly requires repeat service, some companies forego the expense, while others require an additional charge.

Enrollment Fees

While this isn’t standard across the board with home warranty companies, some do require a one-time enrollment fee before service begins. Contrarily, others initiate a contract without fees and even offer the first month free. 

Compare a Home Warranty Cost Versus the Expenses for Home Repair

After purchasing a home warranty, HVAC systems and other appliances are financially secure from unexpected breakdowns, giving policyholders peace of mind. To understand the significant savings this insurance provides, let’s look at the average expense of a contract from the group American Home Shield to the cost for repairs for equipment in the home. 

American Home Shield offers four plans, which average between $600–$720, annually. Of course, average prices do fluctuate, due to the size of your home and location. To get an accurate quote for your property, fill out this online form

Keep in mind, these average costs for repairs are per incident. You can buy a home warranty and pay a deductible and service fee, or expect to pay these prices by deciding to go without optional insurance.

Average Cost to Repair Common Systems and Appliances

The cost to repair or replace an appliance or home system varies widely, depending on your location, the make and model of the appliance, and other factors. Here are some average costs for repair and replacement


 

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


 

It’s important to remember that most home warranty companies do enforce cost limitations when repairing or replacing systems or appliances. For instance, if the maximum payout per contract term for refrigerator protection is $1500, and a replacement costs $2,000, the policyholder must make up the difference. Still, an adequate emergency fund is easier to manage with a home warranty company supplying the bulk of financial support. 

 

american home shield

Our Recommended, Reasonably-Priced Provider: American Home Shield

There are many options on the market for a home warranty, and not all are created equal. Through our research of the best home warranty providers, we determined that American Home Shield is the best provider for most consumers. For one, the company has been in business for nearly 50 years. This illustrates the reliability and trust you’ll get when signing up for a plan through this provider.

Get A Free Quote from American Home Shield

 

American Home Shield offers 3 different plan options as well as a Build Your Own plan. Our research team likes how consumers are given quite a few options when it comes to choosing their coverage. Homeowners in every state except Alaska are able to sign up.

AHS offers three packages with different pricing tiers:

  • Appliance Plan: $39.99/month — covers appliances like refrigerators, washing machines, and ovens. 
  • Systems Plan: $39.99/month — protection for expensive HVAC systems, electrical, plumbing, and ductwork. 
  • Combo Plan: $49.99/month — a combination of both the appliance and system packages. 

The combo plan is the most comparable offering to the Total Plan offered by Choice Home Warranty for an average of $42 per month. The difference between the two companies results in  savings of $95.88 per year, for nearly identical coverage. 

Service Fees

American Home Shield offers a unique scale regarding service fees and allows policyholders to select the cost when buying a home warranty. They can choose from $75, $100, or $125 as the price due when a technician arrives. Of course, each tier will alter the premium cost; when $125 is selected, the contract price is at its lowest rate.

 

choice home warranty

Runner Up: Choice Home Warranty

Our team of researchers recommends Choice Home Warranty as the second best overall home warranty company for numerous reasons. First, its packages and policies are concise and precisely inform policyholders about what to expect. Also, around-the-clock customer service makes processing claims and reaching an expert easy, which is great for peace of mind when disaster strikes. 

 

Get A Free Quote from Choice Home Warranty

 

Choice Home Warranty has been in business for 11 years and has handled more than 2.5 million service requests in over one million homes throughout the United States. While not yet accredited by the BBB, the group has a B- rating. Its protection is available across the country, only excluding California and Oklahoma. 

Choice Home Warranty offers consumers two valuable packages and the option to include add-ons for an increased fee.

  • Basic Plan: Covers 13 major systems and appliances
  • Total Plan: Covers everything in the Basic Plan, plus your air conditioning, refrigerator, and clothes washer and dryer 
  • Add-ons are also available

With only two packages available, consumers can make an easy decision about which insurance is efficient for their home while protecting a budget. 

On average, premium prices for Choice Home Warranty are in line with other home warranty companies, or a better value. 

Service Fees

Choice Home Warranty is also a better option when considering trade service fees. Its flat rate of $85 per incident is near the low end of the $75–$125 range throughout the industry. 

Other Costs to Consider

Since Choice Home Warranty doesn’t require an enrollment fee and offers the first month free, the service deductibles and premium costs are generally the only costs to consider. However, for anyone with a home warranty contract, building an emergency fund is of great importance as limitations and exclusions may require you to share a portion of financial responsibility after repairs or replacements. 

 

Closing Thoughts

American Home Shield, as our best overall value and best for appliances provider, is a great choice for any homeowner. We also feel the coverage from Choice Home Warranty is exceptional for older homes, aging appliances, and any homeowner who lives on a budget. Knowing that there is financial assistance during unexpected breakdowns is an excellent warranty to bundle with your existing homeowner’s insurance policy.

 

Photo Credit: Adobe Stock, © Ursula Page