How do you choose the best home warranty plans for your needs?

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Become a homeowner, they said. It’s cheaper than rent, they said. While owning has huge advantages over renting, it can be far more expensive than you might expect.

When you rent, the landlord is on the hook for repairs and maintenance. If your stove stops working, the plumbing breaks, or if the roof starts leaking, they are responsible for fixing it. If you own a home, you’re the one who has to pay to resolve the issue.

Often, new homeowners learn a hard lesson when they submit a claim of this nature to their insurer. Virtually all home insurance policies exclude maintenance costs, or damage resulting from general ‘wear and tear’. This is cold comfort to homeowners, as a furnace or central air system that needs to be replaced can cost a homeowner thousands of dollars out of pocket.

These expenses can cripple a household budget in the blink of an eye. Thankfully, there is a way to reduce homeowner risk – for a reasonable monthly premium, home warranty companies can greatly reduce the stress that comes with home maintenance.

In this post, we’ll talk about what home warranties cover, how much they cost, and how to pick the plan that’s right for you.

What does a home warranty cover?

Most home warranty companies offer three main plans – appliance-only, systems-only, and a combo plan that covers both. An appliance plan covers things like refrigerators, stoves/ovens, washer/dryers, dishwashers, microwaves, and many others. A systems plan covers infrastructure like wiring, plumbing, climate control, water heaters, and more.

However, like homeowners insurance, there are exclusions. Some companies (like American Home Shield) won’t cover repairs on things like free-standing freezers or the digital displays that come with modern refrigerators.

Many homeowners sign up for combo plans, as they offer peace of mind at a great price. However, it is important to shop around to get the best possible deal, as there is strong variation in plans offered by different home warranty companies.     

What separates the cheapest and most expensive home warranties?

Homeownership is defined by expenses. While home warranties often save money, some plans may not fit every household budget. Fortunately, these firms offer a wide range of plans at different price points.

Appliance-only home warranties occupy the bottom end of the scale. These plans are the cheapest option that home warranty firms offer, as they only cover ‘wear and tear’ repairs on appliances like stoves, fridges, and dishwashers. As a result, the per month cost of appliance-only home warranties runs between $19 to $36 per month.

Premier plans are the highest end contracts home warranty firms offer. For $40-$50 per month, they cover a wider range of appliances and home systems than the cheaper appliance and systems-only plans.

They also cover extras that cheaper plans exclude – for example, America’s First Choice Platinum Plan covers refrigerators with ice makers, faucet repairs/replacements, and plumbing stoppages – all things not covered in its Gold Plan.

There’s more that goes into the pricing of a plan than its contents, though. A home warranty firm can charge different rates based on a variety of factors – the state where you live, taxes, climate, and other localized risks can make your plan cheaper or more expensive than elsewhere in the country.

The age of your home and appliances is another big determinant to the final price of a home warranty contract. A policy on a new home decked out with state-of-the-art appliances will cost less than one that insures a 100-year-old character home with a range and fridge that are 20 years old.

Not sure whether you have room in your budget for a specific home warranty plan? This is the perfect calculator to answer your question – by playing around with its sliders, you’ll be able to see whether its annual price is cost effective for you or not.

Which home warranty plan is best for me?

You may have the resources to afford the Premier Plan, but it is really worth shelling out an extra $10-20 per month to get it? There are a few things you should consider when you have multiple home warranty plans to choose from.

First, you may already be covered. Some credit card companies offer a warranty on appliance purchases, as do some appliance manufacturers – check your cardholder agreement before signing on to an appliance-only home warranty.

Secondly, read the fine print of every policy you are considering. Some have interesting exclusions (e.g. ovens that break in the middle of a self-clean, dishwasher damage caused by broken glass, etc) – by comparing lists of what is/isn’t covered, you can get the best possible deal for yourself.

Finally, make sure you don’t pay a higher service fee than necessary. This is the ‘deductible’ charged by the home warranty firm each time they dispatch a repair person to your property. Depending on the plan and company, these can range from $0 to $100 per visit.         

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