A home warranty is a service contract that will cover the cost to repair or replace your home systems and appliances when they break down due to normal wear and tear. For many homeowners, a home warranty offers peace of mind, allowing them to budget better for costly repairs. Yet, it might not be worth it for everyone.
That’s why USA TODAY asked the experts to explain when a home warranty is worth it and when you can consider other options.
“In my experience spanning over 33 years as a Florida real estate broker, I would say that 90% of the time, they [home warranties] are worth it. Even if there is a year you do not need to use it, the peace of mind of knowing you will not be hit with an unexpected repair bill has value in and of itself,” says Kristen D. Conti, a broker and co-owner of Peacock Premier Properties in Englewood, Florida.
When is a home warranty worth it?
A home warranty is most worthwhile when you’re facing uncertainty or higher risk of costly repairs. “Home warranties make the most sense for first-time buyers, owners of older homes or anyone who doesn’t want surprise repair bills in their first year of ownership,” says Austin Glanzer, a seasoned home flipper and co-owner of 717 Home Buyers in Lancaster, Pennsylvania.
Whether or not you know your home’s history, unexpected household repairs are not uncommon. Anything from plumbing issues missed in inspections to aging appliances you thought would hold out one more year can easily crop up when you can least afford a major new expense. A home warranty can help defray those costs.
If you don’t have an emergency fund saved up, expensive home repairs can be a one-way ticket to credit card debit. “If a $5,000 HVAC failure would seriously stress your budget, a warranty can offer peace of mind,” Glanzer adds. A home warranty would likely cover this repair cost, making it worth the monthly premium.
When is a home warranty not worth it?
Ultimately, a home warranty is only worth it if you use it. If your annual premium plus service fees don’t at least break even with typical fixes, or if the plan’s limitations make it hard to get quality service, you may be better off budgeting for repairs yourself. Here are some examples of when a home warranty may not be worthwhile for you:
It may not be worth it if you rarely file claims or your typical fixes cost less than the plan’s service fee (the deductible you’ll pay every time you submit a claim).
If the coverage cap for your warranty is too low, then you’ll end up paying the difference on big‑ticket repairs, especially for major HVAC, plumbing or electrical issues. Likewise, broad or vague exclusions (e.g., preexisting conditions, improper installation, lack of maintenance, code upgrades, refrigerant or disposal fees) can turn legitimate issues into claim denials. These can make a home warranty not worth it for many homeowners.
The contractor network can also be a source of frustration. “On the down side, many home warranties only allow for certain contractors to be used in the event of a defect covered by the warranty. This is often where the problem lies,” says Brad Dwin of We Buy MD Homes. “Many times, the service professionals allowed by a specific home warranty don’t have adequate ratings and reviews. In some cases, they aren’t even licensed or perhaps they don’t actually have any reviews online. Those are red flags,” he adds.
If any of these are true for you, you can hold off purchasing a home warranty:
- You have an emergency savings fund with enough to cover unexpected costs.
- Your systems and appliances are new.
- Your systems and appliances are covered under a manufacturer’s warranty.
Home warranty cost vs. value
The average cost of a home warranty that covers systems and appliances is between $43 and $67 per month, which comes out to between $516 and $804 per year. A plan that just covers just one or the other averages between $30 and $40 per month, or between $360 and $480 per year. Some of the most expensive plans cost up to $100 per month, or $1,200 annually.
The value you actually get from a home warranty can vary widely based on the following:
- Whether or not you run into covered issues with your systems or appliances
- The extent of the problem you face with covered items
- The quality of the coverage you purchase
- The cost of the repair or replacement
When you buy a home warranty, you’re betting that the cost of repairs and replacements for covered items will exceed the annual cost of the warranty itself. However, you should also consider the peace of mind that a home warranty can provide, as this can be enough value on its own for some homeowners.
How do you break even on a home warranty?
There’s no way to guarantee that you break even on a home warranty, as most contracts exclude preexisting issues, and you can’t predict breakdowns with any certainty. However, you can use past expenses to estimate future ones.
If you have records of repairs and replacements you’ve made in the past, look to see how much you’ve paid per year for different items. If the annual total is higher than the annual cost of a home warranty, chances are good that coverage will be worth it. This is especially true for older homes because breakdowns from wear and tear become more frequent with age. You may be more likely to break even on a cheaper home warranty.
Sometimes, coverage is worth it even if you don’t break even using past expenses, though. Even a single, unexpected HVAC issue could immediately make your home warranty worth it. A central AC repair can cost thousands, and a full replacement can reach above $10,000. You can base expected value on past expenses, but remember that it’s not a perfect science.
New homes vs. older homes
Home warranties usually aren’t worth it for new homes because builder warranties and manufacturer warranties usually cover appliances and systems in new construction. Home warranties won’t pay out on anything that’s covered under another warranty.
People living in older homes with aging appliances and systems are much more likely to benefit from home warranties. The older your appliances and systems are, the more often you’ll experience problems that your warranty can pay out on, which means you’ll more quickly break even and tip into positive value.
Older homes are also more likely to need replacements on covered items, and replacement costs are almost always higher than repair costs. For new construction, more affordable repairs are more common. For older homes, there’s a higher probability that you’ll need a more expensive replacement.
Homeowners vs. landlords
Homeowners and landlords can both benefit from home warranties, but in different ways. Homeowners get peace of mind that they won’t be on the hook for expensive, unexpected repairs in their home. Many providers have in-network technicians, too, so homeowners often don’t need to research and vet repair companies for every part of their homes.
Landlords see similar benefits and potential savings, but they also get the opportunity to keep their tenants happy with the speed of service. With a single call or online claim, a landlord can set the wheels in motion on a repair and have a large network of technicians to choose from for a fast response. Most tenants will appreciate the quick service that home warranties can offer.
How to make a home warranty worth it
“A warranty can pay for itself with one major repair,” Glanzer says. You just need to submit claims as soon as you notice a problem, maintain your home systems and appliances and above all, remember to use your warranty. “Often times, though, people forget they have a warranty or they do not have a major problem in their house,” he adds.
To make your home warranty worth it, you should:
- Read the contract line by line. Know what’s covered, what’s excluded (e.g., preexisting conditions, improper installation), coverage caps and the waiting period.
- Choose the right plan for your home. Match coverage to your actual systems and appliances. You can skip add‑ons you won’t use. If you have a new HVAC system, you likely won’t need that coverage and can stick to a cheaper appliance-only plan.
- Track fees and limits. Compare service call fees, per-claim caps and annual aggregate limits to the cost of repairs and replacements in your area. Make sure the limits are enough to cover the most common repairs.
- Submit claims promptly. Report issues as soon as you notice them to avoid denials related to neglect or poor maintenance.
- Document everything. Keep photos, serial numbers, maintenance receipts and technician notes because these only strengthen claims and appeals.
What to consider when researching home warranty plans
A home warranty is best employed as a budgeting tool, not an overall promise of repairing or replacing all your out-of-service appliances and systems. “It’s best to approach the service with realistic expectations instead of promised savings,” says Seann Malloy, the founder and managing partner of Malloy Law Offices, who regularly handles real estate litigation. While you can rely on a home warranty for many repairs, it’s not designed to cover everything.
“Bottom line is read the fine print, know what is covered by the warranty and check for any ambiguous terms or conditions,” says Dwin. Further, Malloy recommends you read coverage limits “line by line and ask how often claims are denied and for what reason” so that you get a sense of how well the warranty’s coverage is applied and the major reasons why claims get denied.
Here are some other things Dwin and Malloy agree homeowners should consider as they look for the right home warranty plan:
- Vet the contractor network. Check Google, Yelp, Trustpilot and licensing databases for any technician the warranty uses. Lack of reviews, poor ratings or missing licenses are red flags.
- Confirm you can choose your own pro (or not). Ask whether out‑of‑network contractors are allowed, and under what conditions (e.g., prior authorization, reimbursement caps).
- Clarify ambiguous terms. Ask how the plan interprets phrases like “improper maintenance,” “preexisting condition,” or “normal wear and tear,” and get examples in writing (i.e., email).
- Scrutinize coverage limits. Note per‑claim and annual caps, parts/labor limits and any sub‑limits for high‑cost systems.
- Ask about denial rates and reasons. Request data or examples of common denials (e.g., lack of maintenance, code issues) so you know the pitfalls.
- Set realistic expectations. Treat the warranty as a budgeting tool, not a promise to repair or replace every out‑of‑service item.
- Understand the claims process. You should know how to file, typical response times, re‑service windows for failed repairs and documentation you’ll need, including photos or maintenance records.
- Compare total cost vs. likely use. Balance premiums plus service fees against the age and condition of your systems and appliances to make sure the plan price makes sense for your home’s needs.
Where to buy a home warranty
The team at USA TODAY uses an in-house methodology to review and rank the industries most popular home warranty companies. After comparing cost, coverage, exclusions and coverage caps, we found that American Home Shield and Select Home Warranty are among the best in the business.
About the author
Alora Bopray is an editor and writer who has covered the home services industry for nearly a decade. She is an avid DIYer who uses her own successes (and mistakes) to educate homeowners on how to take better care of their homes. Categories covered by this author include home warranty, gutter guards, pest control, mattresses, roofing, car warranty, home insurance, car insurance, weight loss and hair loss.
Frequently asked questions
What are the disadvantages of home warranties?
Home warranties have exclusions to coverage, such as preexisting conditions, cosmetic damage and structural damage to your home, like the foundation. They also have coverage limits, meaning your plan may not be enough to cover the full amount of a system or appliance replacement.
What is a red flag on a home warranty?
A home warranty that offers to cover everything yet has an extensive list of exclusions is a red flag. Poor customer reviews is also a red flag because it indicates that customers may not have been satisfied with their service.
Do home warranties ever pay out?
Yes, home warranties do pay out if your covered home systems and appliances break down due to normal wear and tear.