Home Warranty: Is It Worth the Risk?

⬇️ Prefer to listen instead? ⬇️

• ⚠️ Over 58% of homeowners report trouble getting home warranty claims approved (Forbes, 2024).
• 🧾 Most home warranties cap coverage at $1,500–$2,000 per item, leaving customers to cover the rest.
• 💡 Other options, like repair funds or purchase concessions, give more freedom and have fewer rules.
• 💸 Premium home warranty plans can reach up to $1,500 annually, plus service fees per claim.
• 🏠 Systems under 10 years old still have about a 20% failure rate, so planning for repairs is key.

What Is a Home Warranty?

A home warranty is a service contract. It covers costs for main home systems and appliances that stop working from normal use. This is different from homeowners insurance. That insurance covers damage from things like fires, storms, or theft. A home warranty instead deals with common breakdowns. For example, your furnace might stop in winter, or your dishwasher might not turn on. You can buy these plans on their own. Or, they can come with a home sale.

Most home warranties last 12 months. You can renew them each year. This can be good for first-time buyers who do not know about repair and upkeep costs. It also helps landlords with many properties. And sellers might like it to make their homes more appealing. It gives future buyers more peace of mind.

What Does a Home Warranty Typically Cover?

Home warranties cover main appliances and systems together. But how much they cover changes a lot, depending on the company. Below is a list of what a basic plan usually covers. Many companies also have extra upgrades or full packages for an added cost.

📝 Important: But coverage has limits and things it does not pay for. Each plan limits how much the company will pay for each appliance or system. This is usually $1,500–$2,000 a year. If your AC system needs replacing and costs $5,000, you might still owe thousands. This is true even with warranty protection.

Things usually not covered are:

• Small appearance problems
• Appliances or systems that did not work right before coverage started
• Things that were not put in right or kept up properly
• Parts of the house like windows, doors, and walls

How Do Home Warranties Work?

A home warranty might seem like a safety net. But knowing how it works helps you know what to expect.

Here is how claims usually work:

1. A covered appliance or system stops working.
2. You call the warranty company to ask for service.
3. You pay a service call fee. This is a set charge for each problem. It usually costs $75 to $125.
4. The company sends a technician from its approved list.
5. A technician checks the problem. Then they tell the warranty company what they found.
6. The company decides if the contract covers the repair or replacement.
7. If they approve it, the contractor fixes it.
8. If not, you pay for everything.

🛠️ One big problem is you usually cannot pick your technician. The company sends someone from its own list. This can cause delays, uneven quality, or workers from other areas. These workers might not know local rules or ways of doing things.

❗ Companies might say no to your claim if:

• The problem comes from bad upkeep or an issue already there
• You cannot show proof of regular upkeep
• The system was not put in right or changed

Average Home Warranty Cost in 2025

How much do home warranties cost in 2025? There are two main kinds of costs:

1. Annual Premium

This is the main fee you pay to start or renew your coverage.

These costs depend on the company, where you live, how old your home is, and how many systems are covered.

2. Service Call Fee

Each time you ask for service, you will pay a set fee. It is usually:

• $75–$125 per claim

Even if workers find many problems during one visit, most companies charge this fee for each system check. This is true unless they say otherwise.

🧾 Many service calls can quickly cost a lot. This is especially true if the total cost becomes more than you thought you would save.

(Forbes Advisor, 2024; National Home Service Contract Association, 2024)

What Can Go Wrong with Home Warranty Service?

Many homeowners first buy warranties expecting easy protection. But they get frustrated. Many claims are still denied. More than 58% of people in a 2024 Forbes survey said they had a bad problem. This included claims that were denied or delayed.

Common Problems:

• Claims denied for “preexisting issues.” This happens even when the problem comes up during the active policy time.
• Requests for upkeep papers. For example, for regular furnace tune-ups. Many homeowners do not keep these.
• Low payment limits. This is true especially for older, costly systems.
• Problems finding contractors. In country areas or places with fewer people, it can take days to get a technician.
• Delays in approving repairs or replacements. This is especially true if more checks or parts orders are needed.

🧠 Buyer Warning: Some warranty companies have a history of bad customer service or unclear rules. Always look up reviews and complaints with the Better Business Bureau (BBB). Do this before you sign a contract.

Is a Home Warranty Worth It?

To decide if a home warranty is worth the money and trouble, think about your own situation and what you expect.

✅ A Home Warranty Might Be Worth It If:

• You own a home for the first time. You do not know about appliance costs or upkeep.
• Your new home has older systems. A builder does not cover these.
• You like knowing repair costs ahead of time. You want to avoid unexpected costs.
• You sell a home. You want to make future buyers feel better. It gives them less short-term risk.

❌ A Home Warranty Might NOT Be Worth It If:

• Your property has new systems or ones updated recently. These are still under maker or builder warranties.
• You are fine with handling your own repair people and fixing things yourself.
• You keep a good home upkeep fund. You would rather not work through another company.
• You worry about few contractor choices or service delays.

In the end, the main thing is if you will file many successful claims while covered. If not, you might just be paying extra for peace of mind. You will not get money back from it.

Alternatives to Home Warranties

Do not just rely on home warranties for protection. Look at other options. These fit your money style and how much risk you can take.

For Buyers:

• Seller Credits at Closing: Talk to the seller. Get some cash ($500–$1,500) right away. This helps pay for possible repairs.
• Repair Escrow Agreements: These set aside money to fix problems already there and written down. This happens before or soon after you move in.
• Buyer Agent Rebates: In many states, agents can give back some of their commission after closing. Use this for repair money or better appliances.

For Sellers:

• Inspections Before Listing: These help find and fix problems before buyers use them to get a lower price.
• Price Changes Instead of Warranties: Give direct discounts on the sale price. Do this instead of standard warranties. These warranties might make buyers unhappy later.

For Everyone:

• Home Upkeep Fund: Just put aside $1,000–$2,000 each year. This easy option gives you:
  • No limits on claims or risk of denial
  • You can pick your own contractors
  • Any money you do not use builds up each year

📊 The Federal Reserve says 41% of Americans cannot pay for a sudden $1,000 cost without using credit. So saving early is often smarter than betting on coverage.

How to Maximize a Warranty, If You Choose One

If you pick a home warranty, even with its limits, you can get more from it by planning well:

1. Read and know what is not covered before you sign.
2. Keep records of regular upkeep for HVAC, plumbing, and electrical parts.
3. Sign up your service contract right after buying a home. Do this especially if the seller gave it to you.
4. File claims fast. Many contracts have tight time limits (24–48 hours).
5. Keep track of total yearly costs, including service fees. This helps you see if coverage saves you money each year.
6. When you compare companies, look for:
   • Easy contractor rules
   • Higher payment limits
   • Clear rules for approval or denial
   • Sending service calls online

💡 Tip: Some companies also have upgrade packages. These are for electronics, smart home devices, or code upgrades. Read the small print to see if extras are worth it.

Key Stats at a Glance 📊

Use this quick look at nationwide warranty data. It helps you see common costs and risks.

(Source: Service Contract Industry Council, 2024; NAR, 2024)

Smart Savings Through Our Buyer & Seller Advantages

Smart buyers and sellers use repair savings. They do not rely on warranties that are hard to predict. Here is how we help:

Buyers:

• Get cash back after closing (if state law allows)
• Use that cash back to start an easy-to-use home repair fund
• Work with agents who know how to read repair reports. They also know how to bargain for deals and handle inspection results.

Sellers:

• List for just 1% commission. This saves thousands compared to normal rates.
• Put those savings back into getting the home ready, staging, or direct buyer credits.
• Work with agents who give deals that add value. For example, landscaping or small home updates.

Final Verdict: Should You Get a Home Warranty?

A home warranty can help with sudden repair costs and long-term savings. But its small print means it is not for everyone. If you have older systems, like help from others, or want peace of mind in your first year of owning, a warranty might be worth it. But other options often give more freedom and coverage. For example, buyer rebates, direct savings, and custom repair funds. These do not have the problems of denied claims or service delays.

→ Start making smart real estate moves with our buyer-seller tools and agent help. Take charge of owning your home today.

Citations

• Forbes Advisor Staff. (2024). Are home warranties worth it?. Forbes. Retrieved from https://www.forbes.com/
• National Home Service Contract Association. (2024). Consumer guide to home warranties.
• Service Contract Industry Council. (2024). Home warranty claim statistics.