The main reason people get a home warranty is that they hope it will help them cover the cost of home maintenance. Whether appliances or pools, what everyone is essentially looking for is whether their home warranty of choice covers what they need at a adequate price. However, not many people realize how much it costs to maintain their house now, and how much it will cost them to do so in the future, as compared to the cost of a home warranty and its benefits.
The answer to the question “are home warranties worth it” is too complex to address without delving into the nitty gritty of the home warranty works, and what kind of coverage it provides. The short answer is that it may save money for you, under certain circumstances, and may end up being a complete waste of money, under other circumstances. The factors you have to take into consideration are the age of your house, its contents in terms of appliances and systems, how old are these appliances and systems, and of course the actual home warranty plan you are considering.
The questions you should be asking yourself instead
- What do home warranties actually cover and how do they intend to save money?
- What is the alternative cost of bearing the costs of house maintenance?
- Are there any situation in which I would NEED a home warranty?
- So, should I get a home warranty? 🐞
- Which home warranty plans are actually worth it? 🏆
- Is a home warranty worth it for me as a home seller or real estate agent?
What do home warranties actually cover and how do they intend to save money?
Prior to pondering about whether a home warranty is worth it for you or needed, you must understand how home warranty works and what are the different variables in play. Home warranties are in essence a service contract which provides a promise to repair certain appliances and systems if they malfunction. In exchange for that promise, you are paying a set amount of money every year (named “premium”). Additional cost to the annual premium would be a service-fee for each time you call in a repair person.
The way home warranties are promising their clients to save money is two-fold:
- The overall service and item replacements you will get from your home warranty company will surpass what you would have paid out of pocket.
- Your budget will be far more stable without unexpected expenses.
The two situations above are purely conditional and depend on a lot of factors, but that’s the “idea” behind why should you be buying a home warranty. Read more here on our FAQ about “what is a home warranty” and other general questions you may have about the industry.
What is the alternative cost of bearing the costs of house maintenance?
There is a very wide range of home appliances and systems which are covered by various home warranty plans. We have created an easy widget which enables you to check the average cost of repair and replacement for every appliance in your home. This is how it looks per each home system or appliance:
Below, you can find a random overview of the cost of appliance repairs and replacements costs:
|Appliance or System||Cost of Repair ($)||Cost of Replacement ($)|
As you are able to the costs of repair can add up very quickly and replacing an expensive home system can have a significant impact on your monthly budget.
Fool.com reports that the average American spent $5,000 on home improvements and repairs in 2018. While we don’t know how much of this amount we spent directly on home repairs, as compared to home improvements, we have to remember these amounts don’t include home appliances that were repaired or replaced.
To summarize, the cost of home maintenance in the USA is high and if you own a big house with many (expensive) appliances and systems, you can at least consider the validity of a home warranty.
Are there any situation in which I would NEED a home warranty?
Before we further delve into how to understand whether a home warranty is worth it for you and whether it can prove useful for you, you must understand you never NEED a home warranty. You could perhaps make a monetary benefit of signing up with a home warranty company, but “need” is a big word for a product which is no more than a simple service agreement. In contradiction, a home insurance is REQUIRED to have if you have a mortgage, and it is far more meaningful (see home warranty vs home insurance comparison here).
If someone – a real estate agent, a home warranty salesperson, or a so called “friend – implies that home warranties are a necessity for homeowners, you should be wary of that person. Calling something which is purely optional a necessity is a used car salesman type of trickery.
So, should I get a home warranty?
You need to get a home warranty if you know how much you are expected to spend in repair based on your past experience, and if you fully understand the terms and conditions of the home warranty policy you are considering. Sounds complicated right? it actually is.
Not many people know how much they are expected to spend and even fewer people understand the nature of the policy they are facing. How would you expect them to properly evaluate whether home warranties worth it or not?
When you choose a home warranty plan you need to see:
- Which appliances are covered in the policy
- What is the coverage limit for each appliance (a home warranty company will not reimburse you for the full costs but up to a certain amount)
- What is the annual premium and cost of deductible
- Whether you find the company reliable and will it follow through on its promises?
You can use our free calculator below to learn more about your expected home maintenance expenses and how much “value” you can get from an average home warranty plan. It’s a very rough indication and shouldn’t be using your to decide whether should you buy a home warranty.
Home Maintenance Calculator
Instructions: To start your calculations, first, select the age of your house on the first slider at the top left corner of the calculator. On the next slider select the number of repairs you have per year. You can immediately see the comparison summary for home maintenance and home warranty in the window on the right side of the calculator. For a more precise estimate, please add the age of your appliances on the appliance sliders: HVAC, Electrical system, Clothes washer, and Refrigerator. According to our data, these items need repairs more often than others. You can add the age of more appliances by clicking on the button below the Refrigerator slider. The bottom line of the calculation should indicate whether a home warranty is worth it, for you, depending on your conditions.
Which home warranty plans are actually worth it?
Finding the right home warranty plan for you can be very complex. There are so many subtle differences between the various providers on the market and their offering, that it would be very difficult to compare which home warranty plans are worth it, and whether should you get them.
Luckily for you, we have created an easy home warranty plan finder also listed the cheapest home warranty plans on the market. The best way around is to find a plan you like and ask for a quote and a copy of the terms and conditions to see they fit your needs.
Alternatively, you can look at the table below showing our top rated home warranty companies across 55 companies we have tested to date.
Majority of Client Reviews Online Are Positive
Clearest Terms and Conditions
Highest Contractor Professionalism
Best Gold Plan ("Platinum Care")Select Home Warranty Review
Customer Service Available 24/7
Least BBB Complaints
Great Reviews on Google Places
Reservice for Failed Parts
1 Free Month Upon Annual Sign-UpTotal Home Protection Review
Is a home warranty worth it for me as a home seller or real estate agent?
One specific scenario in which home warranties are almost always worth it is when you are selling a house (for yourself or for someone). Home buyers tend to appreciate homes that come with a home warranty. It’s a nice freebie and it makes them feel like it can potentially mitigate their expenses coming to a new home. The SCIC even published that homes that come with a home warranty sell faster on the market. Considering the average cost of approximately $500 for a home warranty plan for a year ahead, and the fact many best home warranty companies don’t charge for title changes, it sure does sound like a worthwhile deal.