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Written By Erin EasleyPublished 03/15/22
A home warranty can be a wise investment that saves homeowners money on home maintenance and repair, but consumers need to find the right plan to maximize their savings. Part of determining the best plan is having a thorough understanding of all the costs associated with a given policy.
In this post, we’ll break down the costs that go into a home warranty policy to understand the average cost of coverage today.
For most home warranty plans, the upfront costs include a premium and a service fee. These are direct expenses. These costs will vary from plan to plan and depend on several factors. These include:
Given these variables, the average premium for a home warranty costs somewhere between $300 and $600 per year. Most companies allow for monthly payments, so the typical home warranty cost on a monthly basis is between $25 and $50.
These average basic home warranty prices do not include the service fee that’s due whenever the homeowner submits a claim. This could be $50 or $75 at the low end, but a service fee of $125 or $150 is possible, too. Again, it depends on the plan in question.
As an example, let’s examine the yearly cost of a home warranty in the middle of the price ranges above. That would mean an annual premium of $450 and a service fee of $100. Say the homeowner submits four claims in one year. That would mean the yearly direct expenses of the home warranty come to $850.
Depending on the repairs and services required over the course of the year, that $850 may well be less than what the homeowner would have otherwise spent out of pocket. If one of those service fees was to replace a $2,000 refrigerator, the homeowner would have saved a substantial amount of money. There are indirect expenses with some home warranties to consider, however.
Many warranty plans, like insurance plans, have a deductible associated with them. This could be several hundreds of dollars or more. There are also coverage limits to consider. Some plans will have a cap on the amount they pay out.
Let’s revisit out example from above. The homeowner spent $850 out of pocket on the yearly premium and service fees. They received a new refrigerator valued at $2,000. Let’s say the plan’s deductible was $500 and the coverage limit was $1,500. That would mean the homeowner paid $1,350 for the year—the premium, service fees, and deductible combined. The policy would cover the remaining cost of the refrigerator. That would meet the coverage limit, however, so the plan would no longer pay out for repairs for the remainder of the year.
In our example, the homeowner ultimately received a $2,000 refrigerator for $1,350, but that’s assuming he or she didn’t require any other home repairs or services.
The bottom line is there is a lot of variability in costs associated with home warranties. It’s important for homeowners to do their research, examine different policies, and weigh all direct and indirect expenses. Your research will reward you. The amount you spend on the right home warranty policy will be less than the average appliance repair cost.
Liberty Home Guard has worked hard to be the most consumer-centric home warranty provider in America. Get in touch with our team to talk through your needs and find a cost-effective plan that makes sense for you. You can request a free quote through our website. You can also call us at (833)-544-8273.