August 11, 2021
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When you purchase a home, there are several expenses you may expect: down payment, closing costs, moving fees, etc. You typically plan and save for these expenses because you know they're coming. But you quickly learn about all of the unexpected expenses - usually when a major appliance or essential system in your home breaks and you need to shell out a large amount of money in a short amount of time to have it repaired.
A home warranty is a service contract that covers the cost of repair or replacement of critical systems and appliances at home. These may include your home ventilation and air conditioning system, plumbing and electrical systems, refrigerator, water heater, washer and dryer, oven and dishwasher. A home warranty is different from homeowners insurance, which covers the cost of damage to your home and other structures on your property, theft of your personal property and lawsuits or claims against your property. While homeowners insurance tends to be required by lenders, home warranties are optional.
Finding the best home warranty company to fit your personal needs can be a bit of a challenge. We did our own research to come up with a list of some of the best warranty companies available.
Now that we understand the value of a home warranty at a high level, let's get into some more details about the top companies to help you make your decision.
Choice Home Warranty offers competitive pricing, regular promotions and a 90-day repair guarantee. With a Choice Home Warranty plan, you can cater your warranty to your specific needs and the budget you’re working within. While their basic plan allows you to cover major appliances and home systems, their total plan covers major as well as several minor appliances and systems. In addition, their optional coverage allows you to add specific items that aren’t available through the previous options.
You can select from three different plans that cover 11 systems and 10 appliances from American Home Shield. We like this company because they give customers the option to customize their own plans. Flexibility may be what you need when selecting a home warranty company. In addition to their coverage options, American Home Shield also offers the insight of skilled technicians. They’ll advise you on the best option for your repairs, whether it’s repair or replacement. Their plans combined with excellent customer service make American Home Shield one of our top picks for your warranty needs.
From a homeowner’s perspective, Select Home Warranty most effectively alleviates the hardest aspect of home repairs: They find and send professional technicians to assist with repairs. By exceeding expectations with this area of their service, Select Home Warranty sets their company apart. Once the professional arrives, you’re only charged a minimal service fee for the repair or replacement of your system or appliance. It’s as easy as picking up the phone and initiating the claim.
Much like our other top home warranty companies, First American Home Warranty offers similar amenities. Several custom plan options and licensed technicians are some of the commonalities you’ll encounter. However, you’re also promised repairs 24 hours a day and 7 days a week with First American Home Warranty.
America’s 1st Choice Home Club matches its competitors and takes their service offerings to the next level. With the option of three separate plans and an additional coverage option, they have homeowners covered in a variety of ways. However, there’s a benefit that sets them apart from the pack: This company provides licensed real estate agents who offer their home buyers the opportunity to tap into their policies.
|Choice Home Warranty||American Home Shield||Select Home Warranty||First American Home Warranty||America's 1st Choice Home Club|
|Best For||Service||Overall||Low Deductibles||Flexibility||Customization|
|Pricing||$44/mo - $50/mo||$30 - $45/month||Basic Plan: $38/month||$28/mo - $45/month||Platinum Plan: $50/month|
|Servicing Fee||$75 - $125||$75 - $125||$45 - $75||$75 - $100||$75 - $125|
Just as there are different insurance plans, there are also different home warranty plans, in which costs and coverage may vary. The best home warranty for you will depend on your personal needs as a homeowner. Likewise, what your home warranty will cover will depend on the type of plan you choose.
There are typically three types of home warranties: one that covers a specific appliance, one that covers a variety of appliances and one that covers several appliances and critical systems in your home. Keep in mind, not all appliances or systems will be covered under a home warranty.
Home warranty coverage extends for a specified contract term, generally a year or two. After that, the new owner can renew or cancel the service contract.
A home warranty works like this:
Keep in mind that some home warranty companies may have a service call fee for any repairs. This fee isn’t included in the actual cost of the repair.
When considering a home warranty, it’s important to review the items in your home and determine if adding a warranty would add value. For example, if your HVAC system is nearing the end of its life, a home warranty plan may come in handy and save you from extra costs.
Your home is one of the largest purchases you’ll make, so any extra precautions you can take to save your investment are beneficial. When deciding if a home warranty plan is right for you, here are some basic questions to ask before purchasing a plan:
There are some circumstances where you may not need a home warranty.
When it comes to major repairs, there’s never a good time financially. That’s why having the best home warranty can be a real lifesaver.
“I recommend them with just about every home I sell,” says Sharilyn Weber, a REALTOR® with Lion Real Estate in Fresno, California.
There are three basic kinds of home warranty plans, each escalating in cost and coverage.
Even the most expensive home warranty plans might not cover all your home appliances or systems. A second refrigerator in the garage or equipment for an outdoor pool might not have coverage under the warranty contract. If you want items outside of the original policy covered, you’ll have to negotiate with the insurance company.
“They’re very specific in what they do and don’t cover,” says Weber.
Negotiating could pay off. Weber includes her pool’s cellular-powered chlorination system in her own $670 home warranty.
“We’ve lived in our home 6 years and our cell has gone out three times – that would have cost $1,000 each time to replace. So, in our case, the warranty has more than paid for itself,” she says.
Many first-time homeowners get home warranties and homeowners insurance confused. The difference between them is very important to understand.
Homeowners insurance covers accidental damage to your home or belongings caused by theft or natural disaster.
A homeowners insurance policy covers four primary areas: the interior and exterior of the home, personal property and general liabilities.
If you buy a home with a mortgage, homeowners insurance is a requirement. For more information, read our guide on homeowners insurance and the benefits.
A home warranty helps cover the repair or replacement of an appliance or system component due to wear and tear.
A home warranty may help protect components of your HVAC, electrical and plumbing systems as well as your appliances. You’re not required to purchase a home warranty.
When evaluating a home warranty, make sure you completely understand how much it will cost. This includes taking into account the initial cost, service fees and any other expenses.
The exact price of a home warranty depends on the coverage level you choose. A typical annual cost might be $200 for major appliances and $800 for a policy covering HVAC, plumbing and electrical systems.
If you’re buying a home, the warranty premium is part of the closing costs. However, the question of which party pays the premium is open to negotiation. Responsibility for payment can be relegated wholly to the seller or shared between the seller, buyer and realtor.
Some home warranty policies have a deductible of about $100 or the repair cost, whichever is less. If your warranty carries a deductible, that fee would apply to each repair. And while you won’t be paying the actual repair or replacement costs, you may be responsible for paying a trade service fee of $65 – $125 for each repair. This fee, outlined in your agreement, will cover the service provider coming to your home to diagnose the problem.
Depending on your plan, there may be an annual limit on how much the provider will pay. For plans covering one item, the limit might be $1,000 – $2,000 each year, whereas more expensive plans will have a higher limit. Be sure to read your policy to determine your exact coverage.
Providers can also decline to make payments under certain conditions. This may be the circumstance if they deem a repair to be too expensive. When that happens, the provider might offer to replace the item or pay the depreciated value.
The home warranty provider may deny payment for a few other reasons. If you haven’t performed needed maintenance, you may receive a denial.
They may also deny you if the appliance or system wasn’t installed properly or if there are code violations.
Lastly, you can also receive a denial if there’s excessive wear and tear or if there was a preexisting condition.
While you may have gotten most of your home warranty questions answered, there may still be a few you’re unsure about. Here are some of the most common questions we come across:
A home warranty can provide a lot of value, especially if you’re buying an older home.
“Things are so expensive now to get repaired – just having a repairman out costs $75. In comparison, home warranties are not that expensive,” says Weber.
Some buyers may not think they’re needed, especially if they’ve gone for years without issues.
“If nothing breaks during the coverage period, the customer may, in hindsight, feel the fee was a waste of money, but that’s what managing risk is all about,” says Angie Hicks of Angi.
“But are you financially prepared to replace major components as they are needed, or would you rather pay a set amount per year whether something breaks or not?”
The best idea is to get several quotes from providers to compare prices and coverage. Then decide which, if any, the best home warranty company for you is.
Each home warranty company above underwent evaluation by a predetermined set of criteria.
The following criteria helped determine the best home warranty companies:
To ensure you’re accessing the best home warranty plan, your home warranty should have a clear contract that you can easily read and understand. You should have the option to choose from a variety of plans and find one that fits your specific needs and budget. Finally, your coverage should be comprehensive.
Looking for more tips like these? Visit the Rocket Mortgage® Learning Center to find a wealth of articles written about homeownership and the mortgage process.
**Star ratings determined based on Better Business Bureau rating and writer research. Be sure to do your individual research as these are suggestions only.