There’s no one way to calculate the unpredictable. That’s the purpose of insurance. While a home warranty is not the same thing as homeowners insurance, it is a safeguard against paying the full retail cost of repairing an appliance or replacing an expensive home system if it breaks down. A home warranty can be a sound part of your family’s financial plan that protects your largest investment: your home and everything that’s inside of it.

So, is buying a home warranty only about “peace of mind” or is it actually worth it?

What’s The Value of “Peace of Mind”?

The home warranty industry often encourages homeowners to buy home warranties for “peace of mind.” For families who invest thousands of dollars in home appliances and home systems (HVAC, electrical, and plumbing), a home warranty offers a sense of relief. The thinking is, “You’re covered. Don’t worry. If anything goes wrong, we’ve got you.” That’s useful, but if you never end up putting your home warranty to use, is the “peace of mind” alone worth it? That is something only you can decide.

What Is a Home Warranty?

When something like a home appliance or a home system breaks down due to normal wear and tear, and that item is included in your home warranty coverage, you can call the company and they will send out a contractor to assess and fix the problem. If the item is covered, the warranty company will cover the cost to repair or replace it. In this way, a home warranty is your first line of defense against costly repairs or replacements.

What Does a Home Warranty Cover?

Basic home warranties typically cover appliance items like washers, dryers, refrigerators, ranges/ovens/cooktop stoves, garage door openers, and more. Combination home warranty plans cover appliances and also extend to include air conditioning, HVAC, water heaters, plumbing, and electrical systems.

How Much Does a Home Warranty Cost?

A home warranty can cost anywhere from $300 to $800 per year. This comes down to anywhere from $25 to $75 per month. This cost, however, does not include service fees.

Customers can choose to pay monthly or, like with Platinum Home Warranty, they can receive a 10 percent discount for paying annually. The full details of their plans and discounts can be viewed here. First American Home Warranty offers coverage for “less than $1 per day.” The details of their plans can be viewed here. Coverage differs between home warranty companies, but in many cases warranty plans can be customized so a homeowner has the coverage that makes sense for them, their home, and their budget. For example, American Home Shield offers a flexible Build Your Own Plan option.

Note: Home warranty coverage, availability, and regulation vary state to state. Consult the Compare Home Warranty Quote State Licensing Guide and make sure coverage exists in your state.

Is There a Fee For Requesting Home Warranty Service?

Service fees (the cost to have a service technician come out to verify and fix an issue should one arise) vary throughout the home warranty industry. Through our research, we have found service fees range from as low as $45 to as high as $125, and everything in between.

A First American Home Warranty service fee, for example, is $75 to $100. American Home Shield’s consumers have a choice in price: $75, $100, or $125. The higher the service fee, the lower the monthly payment price and vice versa. Platinum Home Warranty charges $75. Select Home Warranty’s fee is as low as $45. Details of exact fees are included in a home warranty contract, so be sure to read the fine print.

How Does a Home Warranty Save You Money?

Raise your hand if you’d rather pay $75 to repair or replace a broken dishwasher or if you’d rather pay $629 for a brand new one? Distilled to its essence, this is where the value of a home warranty can be realized. Air conditioners can cost between $700 and $3,000. Plumbing systems, $450 to $1,500. Oven ranges, $850 to $3,000. What if any one of these break down? Or, if multiple appliances break down at the same time. Ouch.

Any way you look at it, paying an average service fee of $75 is more affordable than shelling out the full retail price of any system or appliance. Coverage is provided by a company you can count on (here’s our list of top choices), technicians at-the-ready, and customer service to make these types of stressful situations easier.

A home warranty is also usually a better deal than extending a manufacturer's warranty. While an extended warranty costs extra for more “protection” (and is, ultimately, meant to pad a brand’s bottom line), it only covers one item. Home warranty coverage includes multiple items and makes more financial sense.

There is typically no home inspection required to sign up for coverage, so the older the appliances and systems are in the home, the more likely you are benefit from a home warranty plan. (For more on this, check out our article: Home Warranties: Money Pit or Homeowner Lifeline?) With additional benefits for customers – like American Home Shield’s suite of benefits that includes their “Refer A Friend” program, discounts on brand name appliances, up to 50 percent off the retail price of air filters, and electronics coverage through Asurion Services – the savings home warranty companies offer customers can severely offset the cost.

Do I Really Need a Home Warranty?

A home warranty protects a family’s financial budget. In exchange for a small service fee, you can rely on the home warranty company to foot the bill when covered items need to be repaired or replaced.

Ready to start comparing home warranty companies to find the best fit for you and your home? Enter your zip code here and start comparing home warranty coverage in your area.