Homeowners want to know what they will pay for a home warranty today. According to Consumer Affairs, the price ranges from $436 to $812 per year, on average. However, a person must know what they are paying for.
Some plans run less than $300 a year but provide very little coverage. On the other hand, some plans run over $1,000 a year and provide comprehensive coverage. For this reason, a person must consider the cost and what the plan covers to find the right coverage for their needs.
What is a Home Warranty?
Before purchasing a home warranty, a person must understand what it is and how it differs from homeowner’s insurance. A home warranty works in many ways like a manufacturer’s warranty. When an appliance or system in the home breaks, a technician comes out to make repairs or replace the unit. Warranties typically cover normal wear and tear.
In contrast, a homeowner’s insurance policy covers damage resulting from a fire, theft, natural disaster, and other major events. Normal wear and tear will not be covered under the insurance policy, and the policy won’t cover damage to an appliance or system unless it is caused by a major event.
What Factors Determine the Cost of a Home Warranty?
Many factors play a role in prices of a home warranty. A homeowner finds they can create a plan that meets their specific needs while staying within their budget by making adjustments to the coverage. While some elements cannot be changed, such as the size of the home, others can. The provider considers the following factors and possibly others when determining the premium for the home warranty plan.
Some homeowners want a basic plan that only covers a single system or appliance in the home. Other individuals want a comprehensive plan that covers all appliances and systems. The level of coverage selected plays a key role in how much the plan will cost monthly or yearly.
The Home’s Square Footage
Most warranty providers don’t look at the exact square footage of the home when calculating a premium. They divide homes into basic categories and calculate the premium for a home based on which category it falls under. Many providers divide homes into those under 5,000 square feet and homes 5,000 square feet and above.
The Location of the Home
Home warranty rates vary by where the home is located. Service provider availability plays a role in this, as does the climate. Homeowners appreciate having somewhere to turn when they need help to find a service provider, particularly when they have moved to a new area and don’t know who to call. Expect to pay more for coverage in a metropolitan area.
Companies that charge a lower premium each month or year often have higher service fees. The homeowner could end up spending more for the coverage if they choose a plan with a low premium and high service fees.
On the other hand, a plan with a high premium and low service fees may not be of benefit to the homeowner if they only need one or two service calls in a year. The exception to this is a return call for the same problem. Most providers won’t charge a service fee in this situation.
One thing a homeowner needs to consider when evaluating the cost of a home warranty is the peace of mind this warranty will give them. They never need to worry about a high repair bill when they have this coverage. The most they will need to pay is any service fee charged by the warranty provider. This makes it easy to budget each month.