The average cost of a home warranty varies by company, region and coverage offered. According to “Home Warranty Reviews,” a homeowner pays from $300 to $400 for an annual policy, which is close to “Mortgage Match’s” estimate at $250 to $450. A higher estimate comes from “Consumer Savvy Tips,” which places the estimated cost of an annual policy between $300 and $600.
A home warranty policy warrants or guarantees specific mechanical features of a home for the term of the policy. If a covered item breaks down the policy pays to repair or replace the item. Sellers or buyers often purchase home warranty policies to warrant properties for a year after escrow closes. Some property owners purchase home warranties for existing homes, as a way to manage repair expenses involved with property management. Home warranty companies typically offer a basic policy, with limited coverage. A basic policy typically starts at the lower end of the cost spectrum.
When comparing prices of home warranties, the consumer should consider three factors. One is the basic policy's actual coverage. For example, one home warranty company might warrant a home’s air conditioning system in the basic policy, while another charges extra for that coverage. The second factor is the cost of different upgrades. For example, depending on the policy and desired coverage, the consumer may need to pay extra to cover swimming pool equipment or additional roof coverage. The third factor is the cost of the service calls, which might range anywhere from $35 to $75. After paying for the policy, the consumer pays a service charge when calling out a repair person from the company to investigate a problem. There is typically no charge for replacing or repairing the broken item.
Home warranty policies are typically for one year, paid in one payment. Yet some policies might be for a longer term, possibly--but not always--for a lower annual rate. Some consumers receive discounts when purchasing a home warranty during a real estate transaction, while a property owner might pay more for an existing house.
Not all policies come from home warranty companies. Building contractors typically offer home warranties with new home construction. Often the general contractor or a third party hired by the contractor services the policy, at no expense to the consumer.
- "Modern Real Estate Practice"; Fillmore Galaty, et al.; 2006
- Home Warranty Reviews
Ann Johnson has been a freelance writer since 1995. She previously served as the editor of a community magazine in Southern California and was also an active real-estate agent, specializing in commercial and residential properties. She has a Bachelor of Arts in communications from California State University, Fullerton.