Home insurance contracts help reduce costs associated with repairing and replacing household appliances and systems when they fail. These warranties are often included by the seller during the home purchase process as part of the contract, but anyone can purchase a home warranty for themselves.
What is a home warranty?
These are service contracts that protect the systems and appliances within your home. They typically cover common kitchen and laundry appliances. They usually also include home systems, such as the electrical system, plumbing system, air conditioning, and heating.
How much does a home warranty cost?
Home warranty prices typically range from less than $500 annually to about $1,200 annually. Your cost depends on the features of your home, the coverage you choose, and the company from which you purchase your plan. You may also pay additional money for extra services that could increase your costs by hundreds of dollars annually.
Who is the right candidate for a home warranty?
A home warranty might be the right choice in some key situations. One of the most common times a person buys a home warranty is when purchasing a house. In fact, sellers often offer home warranties to buyers as part of the sale contract.
Alternatives to home warranties
The most common alternative to a home warranty – and what most people do – is to self-insure. In other words, when a problem occurs with one of your home’s systems or appliances, you pay for the cost yourself.
If you own a home, regardless of whether you have a home warranty, it is important to have an emergency fund. A general rule of thumb is that you should save at least 1% of your home’s value for repairs annually.
Another way to prepare for unexpected costs is to keep your warranty documents from manufacturers. When purchasing new appliances or systems, the manufacturer should cover the repair or replacement for a limited time.
Compare the best home warranty companies
Here are some of the best home warranty companies:
- ARW Home: Service fees range from $55 to $75 and the annual cost ranges from $420 to $720. Available in all 50 U.S. states.
- American Home Shield: Service fees range from $75 to $125 and the annual cost ranges from $234.88 to $799.09. Available in 49 U.S. states.
- Cinch: Service fees range from $100 to $150 and the annual cost ranges from $335 to $1,110. Available in 46 U.S. states.
- Select Home Warranty: Service fees range from $75 to $125 and the annual cost ranges from $432 to $504. Available in 45 U.S. states.
- Sears Home Warranty: Service fees range from $75 to $100 and the annual cost ranges from $599.88 to $839.88. Available in 49 U.S. states.
Home warranty vs. home insurance
Some people may think that their home insurance will cover the costs of damages to systems or appliances in their home, but this is rarely the case. Home warranties and home insurance provide completely different types of protection, meaning one does not adequately replace the other.
A home warranty is an optional plan that pays for repairs or replacement of the systems and appliances in your home when they fail due to wear and similar issues.
In contrast, home insurance is required by mortgage lenders and protects your home and belongings from certain risks, including fire and natural disasters. Home insurance coverage includes the structure of your home, your personal belongings, liability coverage, and additional living expenses if you are forced to temporarily leave your home due to a covered incident.
If your refrigerator fails due to wear, your home warranty will cover the repair, but your home insurance will not pay for that. Conversely, if your refrigerator is damaged in a house fire, your home insurance will cover that.
Questions
The Common Question (Repetitive)
What is the duration of a home warranty?
Home warranty policies typically last for one year, with the possibility of renewal upon expiration, if desired, and your rate may increase with each renewal. There are also some warranty companies that offer plans lasting three years. The advantage of a longer plan is the ability to lock in your price for a longer period.
What does a home warranty cover?
Home warranties cover the appliances and systems within your home. While there may be some differences in coverage among each plan, the items generally included are laundry appliances, kitchen appliances, electrical systems, plumbing systems, and heating and cooling systems.
Is a home warranty worth it?
A home warranty can save you a lot of money when it comes to repairing or replacing systems and appliances in your home, making it suitable for many homeowners. A home warranty is likely to be beneficial if you have an older home. If your home and its systems and appliances are new, you may not gain any benefit from your home warranty.
Is a home warranty required?
Unlike home insurance, a home warranty is not required. If you are buying a home and the seller offers a home warranty as a concession, there are unlikely to be any negative consequences from accepting it. However, as a homeowner, it is up to you to decide whether a home warranty is right for you.
Source: https://www.thebalancemoney.com/how-much-does-a-home-warranty-cost-7852664
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