Is a Home Warranty Worth the Cost?

There's no one-size-fits-all answer. Deciding if a home warranty is worth the cost depends on your priorities and risk tolerance. Home warranties offer several advantages that can make life as a homeowner smoother.They provide peace of mind by covering repairs or replacements of major appliances and systems that break down from everyday use, which can save you from the stress and financial burden of unexpected repair bills. With Home Warranties, it's important to consider the upfront cost as they may not be ideal for everyone, especially if you're handy and comfortable fixing things yourself, or if your appliances and systems are new. These upfront costs, however, can offer budget predictability. You'll know exactly how much you'll be spending throughout the year, rather than facing the uncertainty of potentially large repair costs. Home warranties are meant to offer convenience to homeowners. When a covered appliance or system malfunctions, the warranty company takes care of finding and scheduling a qualified service professional to visit your home and fix the problem. This saves you the hassle of researching and contacting repair technicians yourself.

Below, we answer some often-asked questions regarding Home Warranties that are essential for homeowners to understand.

What are the benefits of a home warranty?

• Peace of mind: Home warranties cover repairs or replacements of major systems and appliances due to normal wear and tear. This is often something standard homeowners insurance policies don’t provide. This includes your air conditioner, septic line, plumbing systems, replacement costs for home appliances and major home systems, well pumps, garbage disposals, HVAC systems, built-in microwave, septic systems, garage door opener, and more for your old or new home.
• Budget predictability: You'll know the upfront cost (enrollments and service fees) rather than facing unexpected repair bills for things your home insurance won’t cover.
• Convenience: Your warranty provider should help make homeownership easy. The warranty company arranges for a service provider to visit your home. Also, you have the option to enroll in additional coverage as an add-on for your service line or appliance coverage with most companies.

A home warranty policy offers several advantages that can significantly improve your experience as a homeowner. First and foremost, they provide peace of mind. Knowing that a warranty covers repairs or replacements of major appliances and systems that break down from everyday use can alleviate a lot of stress. On top of that, home warranties offer budget predictability. By paying a set premium and potential service fees upfront, you'll know exactly how much you'll be spending throughout the year on appliance and system maintenance, instead of facing the uncertainty of potentially large and unexpected repair bills. A big part of the value in home warranties is that they offer convenience. When a covered appliance or system malfunctions, the warranty company takes care of everything.They'll find and schedule a qualified service professional to visit your home to diagnose and fix the problem, saving you the hassle of researching and contacting repair technicians yourself.

Who should consider a home warranty?

• Homeowners with older appliances or systems
• People who aren't comfortable fixing things themselves
• Those who want predictable repair costs

A home warranty can be a valuable tool for many groups of homeowners. If your house has older appliances or systems, a warranty can provide confidence and assurance knowing you're covered if they break down due to normal wear and tear. Home warranties are also a good fit for people who aren't comfortable tackling repairs themselves. The warranty company will arrange for a qualified technician to diagnose and fix the problem, saving you the time and hassle of finding someone yourself. Typically, home warranties appeal to those who want predictable repair costs. By paying a set premium and potential service fees, you'll know exactly how much you'll be spending throughout the year, instead of facing the surprise of a potentially large repair bill.

What exactly does the warranty cover?

Diving into the details of a home warranty contract is crucial before enrolling in any Home Warranty coverage. Understanding what's covered is key. This includes meticulously confirming which appliances or major systems the warranty protects, like your refrigerator, heating system, or plumbing. More importantly, you'll need to clarify what breakdowns qualify as normal wear and tea and qualify for coverage. Be sure to review any limitations on repairs or replacements. Are there dollar amount caps on how much the warranty company will pay? Are there restrictions on the number of repairs covered within a year? By getting a clear picture of coverage details, you can avoid any surprises down the road.

What is the cost of a home warranty?

Understanding the financial commitment of a home warranty is essential. The cost typically involves three parts: the annual premium or enrollment fee, service call fees, and potential out-of-pocket expenses. The annual premium is the set fee you pay upfront for warranty coverage throughout the year. Some home warranty companies sell warranty plans for individual lines, systems or appliances that can be found throughout a home, and a plan can start as little just $4 or $5 per month. And some home warranty companies also charge a service fee ($50 or $100, for example) to have a service technician come to a customer’s home. The customer will pay this fee directly to the service professional who comes to assess and potentially repair the problem. Also, be aware of potential out-of-pocket costs if a repair goes beyond the warranty's coverage limits. These limits could be dollar caps on repairs or limitations on the number of breakdowns covered within a year. Factoring in all these costs will help you determine if the overall price of a home warranty aligns with your budget and risk tolerance. It’s important to note that warranties are available to homeowners with practically any type of home. Square feet, age, etc. do not limit you in what warranty coverage may be available to you.

Is the cost worth the potential benefits?

The true value of a home warranty hinges on weighing its cost against the potential benefits it offers. On one hand, you'll be paying an annual or monthly premium and potential service call fees for the warranty coverage with a basic plan. On the other hand, the cost can be seen as an investment in peace of mind, knowing you're protected from the potentially high cost of unexpected repairs & replacements on major appliances and systems. Another thing to consider is the convenience factor. With a home warranty, the company takes care of finding and scheduling qualified technicians, saving you the time and hassle of researching and contacting repair people yourself. Ultimately, the decision comes down to your risk tolerance. If you'd rather have predictable costs and avoid the worry of potentially large repair bills, the convenience and security of a home warranty might be worth the investment. However, if you're comfortable fixing things yourself, the upfront cost of a warranty might not outweigh the potential benefits.

What should I do before I buy a home warranty?

• Get quotes: Compare prices and coverage details from different warranty companies.
• Read the fine print: Understand what's covered, exclusions, and service call fees. Check out American Water Resource Terms and Conditions, available on our program pages. It’s important you have an understanding of the yearly or monthly cost involved with the plan costs. You should also read through the frequently asked questions (faqs) on products to understand exactly what’s covered and what isn’t.
• Consider your budget: Factor in the annual enrollment, service call fees, and potential out-of-pocket costs for repairs exceeding coverage limits. Visit several of the best home warranty company websites to get a home warranty quote for your single-family home, real estate investments, or for your rental property. You should also factor in the cost of a service contract for any add-on coverage you may be considering now or further on down the road when your appliance manufacturer’s warranty is no longer valid on your heavily-depended on systems.

Before diving into home services, it's crucial to do your homework. Get quotes from multiple companies to compare not just prices, but also the nitty-gritty of coverage details. Don't skip reading the fine print! Understanding what's covered, what's excluded (like specific appliance brands or pre-existing conditions), and any service call fees is essential. Don't forget to factor in your budget. Consider the annual premium, any service call fees, and potential out-of-pocket costs if a repair goes beyond the coverage limit. This will help you decide if a home warranty truly fits your financial comfort zone.

What are the drawbacks of a home warranty?

Some programs have coverage exclusions so make sure you review the contract to understand what's not covered (pre-existing conditions, specific appliance brands, etc.). American Water Resources provides downloadable terms and conditions on every program page for easy accessibility.

Some companies charge an extra Service Fee for a technician to visit your home. At American Water Resources our fees vary from $25-$150 depending on the program and several programs have $0 service fee upgrade options.

Some home warranty plans may have limits on coverage options, or caps, on how much they'll pay for a repair or replacement. While American Water Resources programs have coverage limits (see terms on program pages for covered items and limits), American Water Resources offers Unlimited Coverage upgrade options on several programs to help you plan your budgets accordingly.

Additional tips:

• Maintain your appliances: Regular maintenance can extend their lifespan and potentially avoid warranty claims.
• Consider a home maintenance fund: Set aside money for future repairs, which may be a better option than a warranty depending on your circumstances.

While a home warranty provider can offer protection for your air conditioning, water heater, electrical systems, washer, dryer, and other home appliances and home systems, taking proactive steps can go a long way. Regularly maintaining your appliances with simple cleaning and recommended servicing can extend their lifespan and potentially prevent breakdowns that would require a warranty claim. For some homeowners, building a home maintenance fund might be a better financial strategy. Regularly setting aside money allows you to address repairs as needed without relying on warranty coverage. This approach can be particularly cost-effective if your appliances are newer or you're handy and comfortable with some DIY fixes.

For more information about home warranties, see our page What Do Home Warranties Cover?