The primary purpose of a home warranty policy is to provide home maintenance services and appliance repair at an affordable cost. If the total home warranty cost year over year exceeds what the homeowner would have otherwise spent by personally hiring independent contractors, the warranty is almost useless.
Consumers need to know the ins and outs of home warranty prices to make an informed decision when shopping for a plan. This means being aware of hidden or indirect expenses as well. In this article, we’ll break down the costs associated with home warranty plans. We’ll also review the average home warranty cost to help you see how the right warranty policy can save you money.
Home Warranty Expenses
There are two main costs associated with the average home warranty plan: the premium and the service fee.
- The premium is the amount you pay to keep your plan active. Depending on the warranty provider and plan, this could be a fixed monthly or yearly expense. As you might imagine, a plan with more extensive coverage will have a higher premium.
- The service fee is the amount you pay whenever you submit a claim to service an appliance or system in your home. It’s analogous to a copay.
While these two costs comprise your main out-of-pocket expenses, there are also some less obvious costs to consider.
- Some plans may include a deductible. This is the amount you should expect to pay before your policy will begin to pay out for coverage.
- It’s not uncommon for a home warranty to have a coverage limit. This is a cap to the amount of money your provider will pay out to repair or replace a covered item in your home. Once the coverage limit is reached, you are responsible for paying the balance.
It’s important to consider these potential expenses when calculating your potential total home warranty cost per year.
Home Warranty Price Ranges
Home warranties come in all shapes and sizes, and their prices reflect that. There are plenty of home warranty policies with low premiums, though these plans are typically more limited in coverage and have high deductibles and low coverage limits. Conversely, policies with high premiums usually have comprehensive coverage, lower deductibles, and higher coverage limits.
On average, homeowners in the United States spend between $300 and $600 per year on home warranty premiums. The premium cost can easily exceed $600 if the plan includes luxury appliances and optional add ons.
The average service fee is between $75 and $150, but remember this is due whenever you submit a claim.
Coverage limits can vary significantly, but the average limit is between $1,500 and $3,000 per year.
Total Home Warranty Expenses
Now that we understand the average costs that factor into a home warranty, let’s explore how these costs add up in practice.
Suppose a homeowner has a policy with a yearly premium of $500. The homeowner submits three claims throughout the year, paying $100 each time. This brings the yearly total to $800.
If those service calls were for inexpensive repairs, such as replacing a filter or other cheap part, the warranty would not have saved the homeowner much, if any, money.
If, however, one of those service calls entailed repairing or replacing a refrigerator, the warranty would have possibly saved the homeowner thousands, even if the coverage limit was reached.
Bear in mind, too, that a home warranty may save money in the long term, even if it fails to save the homeowner money during one particular year. In other words, there may be one or two years in which a homeowner spends more money on a warranty than he or she would have spent on home repairs, but the marked savings of replacing an expensive appliance in just one year can result in net savings over a multiyear period.
Save More with Liberty Home Guard
Ensuring that our home warranty policies save our customers money requires a personalized approach. We recently achieved an A+ rating from the Better Business Bureau—something no other home warranty company can claim—because of our customer-focused practices.
We can help you weigh the potential costs of a home warranty against average appliance repair costs so you can find the plan that works for your home and budget. Get started by requesting a free quote through our website, or call our team at (866)-526-1752.