How much does a home warranty cost? Premiums, fees and caps

What a home warranty costs

A home warranty is a service contract that helps pay to repair or replace certain home systems and appliances. Typical figures from independent sources, not quotes from any company:

• DC Attorney General. A basic home warranty costs $500 per year or more, and each repair usually adds a service fee, typically $75 or more (DC Attorney General).
• NerdWallet. In its review of plans, the average was about $73 a month, or $876 a year, with prices from $28 to $191 a month. Service fees averaged about $108 and ran from $0 to $200 a visit (NerdWallet).

NerdWallet says prices vary by ZIP code, and plans usually cover homes up to about 5,000 square feet (NerdWallet). Ask for the price with and without any add-on coverage so you can see what each option adds.

Service fees: the cost you pay every visit

The service fee, sometimes called a deductible, is what you pay each time a technician visits. A higher fee usually means a lower monthly price, and you usually pay it even if the claim is denied (NerdWallet). Ask whether it applies per visit or per repair (Mass.gov).

Payout caps and exclusions

• Caps. Contracts limit what the company will pay. The DC Attorney General’s example: $1,600 toward a $12,000 boiler (DC Attorney General). Limits may apply per item or to the whole contract (Mass.gov).
• Repair, not replace. The company may repair rather than replace, and may pick the contractor (DC Attorney General).
• Common exclusions. Wear and tear, natural disasters, manufacturer defects and skipped maintenance are often excluded. Plans generally don’t cover structural defects, well pumps, septic systems, roofs, leaky windows or chimneys (DC Attorney General).

Your rights in Illinois

Home warranties sold in Illinois are service contracts under the Illinois Service Contract Act, which covers a home’s heating, cooling, plumbing, electrical and similar systems (215 ILCS 152/5). Providers must register with the Illinois Department of Insurance (215 ILCS 152/25). The law requires:

• Clear terms. The contract must state the price, how to get service, any deductible, exclusions, whether wear and tear is covered, and cancellation terms (215 ILCS 152/30).
• Cancellation. Cancel within 30 days with no service used and you get a full refund. After that, you get a pro rata refund minus the value of service received. The cancellation fee can’t exceed 10% of the price or $50, whichever is less (215 ILCS 152/35).
• If the company doesn’t pay. If a covered service isn’t provided within 60 days of proof of loss, you may be able to file directly with the provider’s reimbursement insurer (215 ILCS 152/20).

Can’t resolve a dispute? File a complaint with the Illinois Department of Insurance.

How to compare plans

• Get several quotes for the same coverage and ask about discounts (NerdWallet).
• Compare the full yearly cost: the price plus the service fees you expect.
• Read the sample contract for what’s covered and what isn’t, the caps, waiting periods and whether it requires arbitration (DC Attorney General, FTC).
• Check what you already have. A manufacturer’s warranty, a builder’s warranty or your credit card may cover some items (DC Attorney General, FTC).
• Many covered repairs cost less than a year of the plan (DC Attorney General).

Not sure a plan is worth it? Read is a home warranty worth it? Broken now? See HVAC and plumbing.