How Much Do Home Warranties Cost?

A home warranty, or home service contract, is a coverage plan between a home warranty company and homeowner. It covers replacement services and repairs on a house's major appliances such as plumbing, pools and spas, air conditioning, furnace, water heater, etc. 

Cost of Home Warranties 

A basic home warranty typically costs between $350 and $500 per year, while a more extensive plan can cost another $100 to $300 per year. If you decide to sign a new contract every year, make sure to re-check the fine print because the coverage can change from year to year. 

Common Types of Home Warranties

Home warranties include a range of plans. Each one provides different levels of protection, so homeowners should read the fine print of any home warranty contract before closing the transaction. While companies differ in their coverage options, these are the three most common home warranty packages: 

  • Basic Coverage: This includes the oven or range, plumbing, garbage disposal, dishwasher, sump pump, exhaust fans, ceiling fans, water heater, Whirlpool tub, built-in microwave and heating and electrical system components.
  • Enhanced Coverage: This includes your washer and dryer, air conditioning, garage door opener, and refrigerator.
  • Optional Coverage: This includes your central vacuum system, standalone freezer, well pump, spa and pool. 

Home Warranties vs. Homeowners Insurance 

Home warranties or home service contracts generally aren't regarded as insurance. Yet, the companies that sell such warranties are usually regulated by their state's insurance commissioner. The Service Contract Industry Council lists 32 states that require home warranty companies to register with the state's insurance commissioner.

The big difference between a home warranty and homeowners insurance is that the homeowner has to use the home warranty company and its service providers to get home appliances and systems repaired or serviced.

Home Warranties for Existing Homes 

Home warranties are frequently offered with a home sale. Including a home warranty can allow the seller to get the maximum price for their home, be free of any more obligations for replacements or repairs, and attract buyers in a difficult market.

The seller usually pays an extra few hundred dollars for a one-year contract — in some cases, the seller may ask the buyer to pay for some of the plan. Many people keep paying the annual premium to avoid having to pay the full cost of replacing a major item. This provides the homebuyer with some peace of mind, knowing any major repair or replacement expenses will be covered during the first year. 

Home Warranties for New Homes 

If you purchase a home that doesn’t already have a plan in place, you should look into one. It’ll protect you against replacement and repair of appliances or mechanical systems within a set time period after the home purchase.