Cost, Coverage, When You Need a Warranty

Peathegee Inc/Getty Images

• Home repair insurance provides coverage if your systems and appliances need to be fixed or replaced.
• You might purchase it if your appliances are nearing the end of their lifespan. 
• For a newly built house, home repair insurance probably isn’t needed as appliances have manufacturer warranties.

Homeownership can be full of unexpected costs when things break. While your

homeowners insurance

policy will cover everything from a leaky roof to mold damage or a cracked foundation, it typically doesn’t pay for repairs to your appliances and major systems when they break down.

And those can really add up. For instance, the typical cost to replace an HVAC system typically ranges from $5,000 to $10,000, according to Home Advisor, a marketplace that connects homeowners to home service providers. For expensive repairs like those, home repair insurance might help.

What is home repair insurance? 

Home repair insurance, otherwise known as a

home warranty

, protects homeowners when their major appliances or built-in systems fail. There are four types of home repair policies, says Ray Plante, vice president of managed services at Rainbow International Restoration, a Neighborly company — an online platform that connects consumers to home service brands. 

• Systems: This type of coverage focuses on your home’s built-in systems like your air conditioning, electrical, and plumbing systems. 
• Appliances: This covers essential home appliances like refrigerators, ovens, washers, and dryers. 
• Combo: Combo coverage applies to an assortment of systems and appliances. Items covered under this type of plan could include garbage disposals, ceiling fans, and duct work. 
• Other: Your provider’s standard home repair insurance may not cover features like swimming pools or well pumps. In this case, you can get additional coverage. 

Home repair insurance doesn’t cover damage to your home’s foundation and structure, theft of possessions, or liability. Homeowners insurance pays for that. However, purchasing home repair insurance may be a good idea to supplement your homeowners insurance, especially if you’re likely to need major repairs costing more than $500 per project. While home repair covers damage related to wear and tear, some policies may have exclusions for improper maintenance and neglect.

If you generally take good care of your systems and appliances and they’re relatively new, home repair insurance probably wouldn’t be financially worthwhile.

How much does home repair insurance cost? 

The coverage you select will determine your annual home repair insurance premiums. Consumers generally pay about $1,027, but this figure can range anywhere from $219 to $1,842, according to Home Advisor. Service fees (also referred to as trade call fees) can range from $75 to $125. A service fee is an additional fee you pay every time you request a service. Here’s a sampling of the range of annual premiums among some of the leading home repair insurance companies:

Source: Home Advisor

“To make the most informed decision, we recommend requesting a sample contract or agreement to clearly understand your policy and options with your insurer,” says Plante. 

Several factors go into the cost of your home warranty that either reduce or increase your annual premiums. They include coverage type, add-ons, size of the home, and the service fee cost. 

While everyone’s needs will be different, you should shop around to get the best value. To get the best option for your home’s needs, obtain quotes from at least three to four providers, Plante advises.

Additionally, it’s essential to look into what’s covered and not covered in the policy. Ensure that your plan covers everything you need at a rate you can afford. Also, call your representative or customer service line to see if a company will cover something you need, says Andrew Iremonger, a realtor and CEO of the Emerald Group, a real estate agency in Florida. 

When would I need home repair insurance? 

You’d want to buy home repair insurance when your systems and appliances are nearing the end of their lifespan. This might be the case if you’ve been living in your home for a while or if you’ve bought a previously owned home. 

If you’re buying a new home, purchasing home repair insurance might not be worth it. You may already have a warranty on your systems and a manufacturer’s warranty on your appliances. 

“In many cases, a newly built home is sold with a year warranty, which may be true for newly purchased appliances,” says Plante.

However, suppose you’re purchasing a previously owned home. Your home inspector may find that your appliances and systems are nearing the end of their lifespan. In that case, having home repair insurance can prevent you from having to pay hundreds or thousands to replace or repair an item.

“With the increases in appliance costs, HVAC, electrical, plumbing materials, and equipment costs due to the economy, and a very robust housing market, purchasing a home repair warranty provides a safety net for the homeowner,” says Plante.

What are the pros and cons of home repair insurance?

Home repair insurance will ensure you’re covered if your appliances and systems fail, filling a gap left by your homeowners insurance policy. However, some might opt to forgo home repair insurance and pay for repairs out of pocket. Here are some of the pros and cons of home repair insurance, according to Iremonger.

Where do I get home repair insurance?

Home repair insurance providers are not the same companies that offer homeowners insurance. Some of the largest home repair insurance companies include Choice Home Warranty, American Home Shield, and Landmark Home Warranty. A real estate agent is the best way to find a promising home warranty company. They will have experience with which company has worked for customers and which hasn’t, says Iremonger.

A home warranty is a great way to save if an appliance or home system breaks down. However, before purchasing home repair insurance, you want to know all the rules, exclusions, and limitations. Do your due diligence. Ask plenty of questions. Compare warranties from different companies. And remember to read all the fine print.