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Home Warranty Defined And The Best Home Warranty Companies Of 2020

Emma Tomsich10-Minute Read
August 10, 2020

As a home buyer, you have many things to consider throughout the home buying process. One consideration you’ll have to make at some point or another is whether you’ll purchase a home warranty. If you’re not interested in or skillful at DIY repairs or unexpected and often large home repair bills, a home warranty might be worth it for the peace of mind it provides. Let’s learn more about home warranties and discuss whether purchasing one is right for you.

What Is A Home Warranty?

Before talking about if you should purchase a home warranty, let’s define what a home warranty is. A home warranty is a service contract, generally issued in 1- or 2-year terms, designed to provide repairs or replacements on major appliances and systems in the home.

Home Warranty Vs. Homeowners Insurance

A home warranty is completely separate and different from homeowners insurance. Homeowners insurance is a type of property insurance that covers damage to your house in the event of an accident, emergency or disaster. On the other hand, a home warranty is used to cover repairs and replacements of a home’s appliances and systems when they fail or age.

Lenders require homeowners insurance to protect themselves from catastrophic loss, but do not require a home warranty.

What Does A Home Warranty Cover?

If you’re interested in purchasing a home warranty, it’s important to know what will be covered. Homeowners can select different levels of coverage that suit their needs and unique situations.

Generally, there are three levels of home warranty coverage. These levels include appliance coverage, multiple appliance coverage, and multiple appliance and systems coverage.

Before you purchase a home warranty, it’s important that you understand exactly what coverage you are choosing. Make sure to conduct necessary research and compare your options before choosing which home warranty package is right for you.

How Does A Home Warranty Work?

After purchasing a home warranty, you will receive a telephone contact to a service to call if repairs are needed. The service will then contact a repair professional with whom they are contracted. Next, the repair provider will contact you, the homeowner, to schedule a visit and complete the repair.

How Much Does A Home Warranty Cost?

There are many factors included in the price of a home warranty. To save you from any surprises, let’s cover all the different costs you may encounter if you purchase a home warranty.

Direct Warranty Charges

Because home warranties have different levels of coverage, it can be hard to estimate what yours might cost. Nonetheless, the average basic home warranty prices range from $350 – $600 per year, while extended coverages can add $100 to $500 to that yearly figure.

Maintenance Of Covered Appliances/Systems

As a homeowner, you should be warned that the costs of maintenance are not included in most home warranties. With this being said, you’ll likely be the one responsible for things like replacing filters, along with other maintenance-related tasks.

Unfortunately, failure to perform maintenance may jeopardize your warranty coverage. This can be compared to an automobile warranty. For example, an automobile warranty won’t pay for things like an oil change or damage caused by a failure to stick to the manufacturer’s oil change schedule. The same goes for a home warranty. Ultimately, homeowners are responsible for their own maintenance repairs, and failure to do so could affect their coverage.

Service Charges

It’s likely that as a homeowner, you’ll be responsible for paying a service fee per visit. Therefore, it’s important that you know what these charges will be. Typically, each visit will incur a service fee that ranges from $50 – $100. If you’re wondering, a callback for a failed repair would usually not trigger a second service fee.

Deductibles

Just with any insurance or warranty coverage, agreeing to pay deductibles can lower the cost of the coverage, and is a point of negotiation when making the purchase. This can also be compared to automobile insurance. For example, oftentimes car owners will pay a flat fee or deductible, which will then lower the cost of the car repair.

Who Should Consider Purchasing A Home Warranty?

Now, let’s talk about what types of individuals might want to purchase a home warranty.

Home Sellers

First, home sellers should consider purchasing a home warranty. There are many marketing advantages that sellers can enjoy if they offer prospective buyers a home warranty, particularly in a buyer’s market. Being able to tell buyers that there is already a warranty on the house could make the home more desirable and help it to sell at a faster, higher rate.

In addition, many sellers who have moved may want to purchase a plan for when they’re not around to handle repairs themselves. This could potentially save sellers a lot of time and money in the long run.

Home Buyers

In addition, home buyers might also want to seriously consider purchasing a home warranty. Having a home warranty can also save buyers ample time and money in the event of needed repairs. Especially if buyers are considering an older home, having a home warranty on the property could be very beneficial and prevent issues with dated appliances and systems.

Buyers can also negotiate with sellers so that they absorb the warranty costs when they purchase a home.

Home Builders

Finally, home builders should consider purchasing a home warranty. Having a warranty would be desirable for many builders because home builders’ warranties cover most repair expenses during the first year of ownership and are included in the purchase price. In addition, most appliances have their own warranties. New homeowners may also have the option to upgrade their coverage in most cases.

Best Home Warranty Companies To Work With

As you consider whether you should purchase a home warranty, you should also think about what home warranty company you would want to work with. We did some research to provide you with a list of the best and most reputable home warranty companies available.

home warranty chart

*Note: The pricing of premiums tends to vary based on plan, location and service fee selected.

Best Home Warranty Companies of 2020: Ranking Criteria

We’ve given you a list of the most reputable home warranty companies, but now let’s explain why these companies are the best of the best. Here’s why we chose these companies based on our ranking criteria.

America’s 1st Choice Home Club

America’s 1st Choice Home Club is the best home warranty company for customization, offering many plans and additional coverage options to homeowners. Their selection includes three separate plans and has additional coverage and add-on options too. Another aspect that sets America’s 1st Choice Home Club apart from its competitors is the option for homeowners to utilize the policies of licensed real estate agents. America’s 1st Choice Home Club also offers low-cost service fees and gives homeowners the option to choose their own service technician for repairs. America’s First Choice Home Club has a B rating from the BBB.

American Home Shield

The reason we chose American Home Shield as the best overall home warranty option is because they offer homeowners the ability to build their own plan. With this option, homeowners can choose from three plans that cover 11 systems and 10 appliances from the company. This gives homeowners the chance to be flexible when customizing their plan and choose what makes the most sense for them. American Home Shield also has low cost options, coverage add-ons, excellent customer service, and skilled technicians who can give you advice on what plan will best suit you. American Home Shield has a B rating from the BBB.

Select Home Warranty

For the frugal homeowner, Select Home Warranty has some of the lowest deductibles and prices. Select Home Warranty even offers customers 2 free months of coverage when they sign up, on top of having optional septic system coverage and free roof leak coverage. In addition, Select Home Warranty is known for having great customer service and connections to many skilled home repair technicians. Select Home Warranty has a B rating from the BBB.

First American Home Warranty

First American Home Warranty is known for having the best flexibility because they provide 24/7 customer service to homeowners in need and offer unlimited service calls. In addition, First American Home Warranty has numerous custom plan options, featuring coverage available for items that were improperly installed or modified. In addition, First American Home Warranty has no coverage cap on heating, cooling or ductwork. First American Home Warranty has a B+ rating from the BBB.

Choice Home Warranty

Choice Home Warranty has the best service out of any home warranty company, offering guaranteed response time within 48 hours. Choice Home Warranty doesn’t deny coverage based on the age of the home or the systems or appliances inside. In addition, Choice Home Warranty offers competitive pricing, multiple coverage options, promotions and a 90-day repair guarantee, and allows customers to cancel for free within 30 days. Choice Home Warranty has a B- rating from the BBB.

Home Warranty FAQs

What Are The Homeowner’s Responsibilities On Maintenance? 

Just to reiterate, there’s a difference between routine maintenance and repairs. Repairs can be covered by home warranties when systems and appliances fail or deteriorate, but routine maintenance projects, such as cleaning an appliance, are ultimately the responsibility of the homeowner.

After Multiple Visits, Will Appliances Be Replaced?

Most policies offer replacement of appliances if they can’t be fixed after reasonable efforts are made. As a homeowner, it is your job to ascertain whether the policy covers replacement or simply reimburses you for the current value of the depreciated appliance.

Do Home Warranties Cover Atypical Homes?

Home warranties are available for a wide range of homes and unique situations. Landlords have the opportunity to purchase a home warranty for a rental unit and pass the cost on to the tenant, if needed. Owners of manufactured or tiny homes can also purchase home warranty coverage.

Summary: A Home Warranty Provides Peace Of Mind

Hopefully by now you’ve learned more about home warranties and have enough information to determine whether you should purchase one. As a home buyer, seller, or builder, having a home warranty can often be very beneficial and save you time and money in the event that a system or appliance fails or deteriorates. Before you purchase a home warranty, learn more about home ownership and conduct research to help you decide what home warranty company you should choose.

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Emma Tomsich

Emma Tomsich is a student at Marquette University studying Corporate Communications, Marketing and Public Relations. She has a passion for writing, and hopes to one day own her own business. In her free time, Emma likes to travel, shop, run and drink coffee.