Best Home Warranty Companies for 2016

Home warranties can help homeowners guard against large unexpected bills when things such as major appliances and plumbing fail. Home warranties are becoming more popular over the years, even more so than back in 1971 when the industry leader, American Home Shield, founded the entire industry.

I looked at several factors to narrow down my top recommendations and I’ve done a lot of the legwork to save you some time. After analyzing several of the top home warranty companies, three stand out as the best in 2016:

The Simple Dollar’s Top Picks for Best Home Warranty Company

  • Best for customization: American Home Shield
  • Best for transparency: TotalProtect
  • Best for low fees and limited exclusions: Complete Protection™

Before you choose a plan be sure to remember the golden rule of home warranties: Read every word of the contract before signing up. And maintain a clear understanding of the pros and cons. Your home warranty policy is meant to keep you from paying big for unexpected fixes, but there are many limits. If you have realistic expectations about what your home warranty can do for you, you may find that the peace of mind is worth the price.

I looked at several factors to narrow down my recommendations. Toward the end of this article, I’ll detail my criteria on how I selected the best home warranty companies. I’ll also discuss the basics of home warranties, what they cover, what to watch out for, and whether they’re the right choice for you.If you’re considering a home warranty to help protect you from costly home repairs, there are several companies that want your business. Unlike the big insurance companies that provide home, life, and auto policies, home warranty companies aren’t household names. For that reason, you may feel like you’re starting from square one in your search.

The Three Best Home Warranty Companies

Best Home Warranty for Customization: American Home Shield

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The largest home warranty company in the nation, American Home Shield allows homeowners to select from three plans or customize their coverage by choosing exactly what they want covered.

Reasons to Sign up

Reasons to Sign up

Reasons to Avoid

Reasons to Avoid

Why It’s a Good Bet

AHS has a build-your-own plan that was the only one of its kind in my search. Customers can also raise or lower their service fee, which helps them control the cost of their plan. Of the companies I investigated, American Home Shield also made it easiest to get a quote — I only had to input my email and street address. The claims center is open 24/7, and there are no exclusions for older homes and appliances.

Why You Might Skip It

The sample contract is easy to overlook before purchase. While it’s ultimately your responsibility to read terms and conditions before buying, I appreciated companies who made it easier to do this. AHS also receives a less-than-stellar “B” rating from the Better Business Bureau, with more than 5,000 complaints filed against it.

Best Home Warranty for Transparency: TotalProtect

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It was also easy to get a quote and compare plans from TotalProtect, which offers three plans and a customizable deductible.

Reasons to Sign up

Reasons to Sign up

Reasons to Avoid

Reasons to Avoid

Why It’s a Good Bet

Customers can add a wide range of additional items to TotalProtect base plans, and service fees are customizable. Better yet, of all the companies I surveyed, TotalProtect made it the easiest to access contracts by clearly linking to them at the bottom of each plan’s description.

Why You Might Skip It

Unlike American Home Shield, TotalProtect doesn’t offer a build-your-own plan.

Best Home Warranty for Low Fees and Limited Exclusions: Complete Appliance Protection

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In a rare move among home warranty companies, Complete Appliance Protection doesn’t charge any service fees or deductibles for repairs. That means you won’t be shelling out more money on top of the price of the plans.

Reasons to Sign up

Reasons to Sign up

Reasons to Avoid

Reasons to Avoid

Why It’s a Good Bet

On top of its lack of fees, Complete Appliance Protection also doesn’t exclude items from coverage because of a lack of maintenance, which is common among other home warranty providers. Customers can choose from four coverage levels and add on items as needed.

Why You Might Skip It

Complete Appliance Protection provides service in only 33 states, so you may not be eligible for coverage.

Home Warranties 101

Don’t confuse home warranties with home insurance, which protects your home and its contents from natural disasters, fire, and other major calamities. Mortgage lenders usually require you to purchase home insurance.

Home warranties, meanwhile, help guard against big bills when things such as appliances and plumbing unexpectedly fail. They are generally not a lender requirement. Read on to discover the particulars of home warranty coverage, including costs, common exclusions, and general pros and cons.

What does a home warranty cover?

Home warranty coverage will vary according to the type of plan you choose and whether your home is a new build or dozens of years old.

For new homes, a home warranty from your builder typically covers any big structural defects for as long as a decade. Heating and air conditioning, drywall, paint, appliances, plumbing, and electrical work may be covered anywhere from six months to two years.

For existing homes, warranties typically fall into a few categories:

  • Appliance-based plans: These typically cover appliances including your range, oven, built-in microwave, dishwasher, washers, and dryers. Refrigerators may or may not be covered.
  • Systems-based plans: These plans focus on heat, air-conditioning, plumbing, electric, and water heaters.
  • Hybrid plans: As their name suggests, hybrid plans combine appliance and systems coverage, but are pricier because they are more comprehensive.
  • Add-ons: Most home warranty companies give you the option to add on coverage for special items not covered under typical plans. Common add-ons include pools, wells, whirlpools, spas, and septic systems.

My husband and I had a new home built that we moved into a few years ago, and we benefited greatly from our home warranty. After living in the home for almost a year, we presented our builder with a list of issues to rectify before our warranty was up.

It included numerous drywall fixes, interior and exterior paint touch-ups, the repair of a wobbly toilet, and a costly valve replacement on our downstairs air-conditioning unit. The air-conditioning repair alone would have been several hundred dollars without the home warranty.

Home warranty terms: Reading the fine print

There’s always a chance your repair won’t be covered, which is a common complaint among home-warranty customers. Of course, you can help guard against this scenario by reading your policy contract extremely carefully. Here are a few things to look for:

  • Coverage limits: You will select which appliances or systems you want covered, but you’ll still need to look very carefully at exclusions. For instance, your garbage disposal will be covered, but not for damage if something other than food is stuffed down it. Your clothes washer will be covered, but its leaky seal is not. Your refrigerator is covered, but only if it’s actually in your kitchen, and specifics like your ice maker may be excluded.
  • Unexpected fixes only: An important point to keep in mind, especially for older homes, is that home warranties are typically intended to cover unexpected fixes. Many plans won’t cover routine service or problems that are the direct result of incomplete or improper maintenance.
  • No pre-existing conditions: Your home warranty probably won’t cover any problem that exists at the time you purchase your policy. So if you’re hoping to fix your ancient, already-inoperable stove with home warranty coverage, you’ll be out of luck.
  • Waiting period: There may be a period of 15 or 30 days before your coverage takes effect. This may be waived if you can prove you had previous home insurance with no lapse in coverage, and it probably won’t be the case if you’re buying a home that’s already covered.
  • Service restrictions: If you hire a service provider on your own instead of going through your home warranty company, you probably won’t be reimbursed for that work.

How much does a home warranty cost?

The price of a home warranty depends on what type of property you need covered — for instance, whether you live in a condo or a single-family home — and whether you stick with a basic plan or buy an upgraded version.

Basic plans typically range from $350 to $500 a year, according to Angie’s List; souped-up plans can cost as much as $800. On top of the cost of the plan, you will also have to pay a service fee or deductible of roughly $50 to $125 each time you need something fixed.

If you’re buying a newly built home, the cost of your home warranty may be rolled into the purchase price of your home. That was the case when I moved into my new home, and it turned out to be a nice perk.

You may also find that if you’re buying an existing home, the seller or real-estate agent may throw in a home warranty plan to sweeten the deal — if this isn’t already a part of the offer, see if you can get it thrown in.

How do I get something fixed under my home warranty?

The home warranty company will arrange repairs on your behalf after you pay any necessary service fees or deductibles. With rare exceptions, you do not get to choose a company to do the work — the home warranty company already has preferred vendors.

You should also understand that a home warranty company is obligated only to make sure covered items are in working order. They don’t have to replace your aging relic of a furnace, even if it’s long past its prime. Same with that funky avocado stove from the early ’80s: Don’t expect your home warranty company to swap it out for a brand-new stainless-steel model.

Do I Need a Home Warranty?

For most homebuyers, home warranties are about peace of mind. For some, that’s reason enough to fork over a few hundred bucks. But like any financial product, home warranties have significant pros and cons. Read on to decide whether a home warranty is right for you.

When to buy a home warranty

A home warranty can be a big help if you don’t have a ton of cash left in savings, a particularly common scenario for homebuyers who just plunked down thousands for a down payment, closing costs, and other incidentals. With a home warranty, one big, unforeseen problem may only cost you a small service fee to fix as opposed to shelling out hundreds.

A reputable home warranty company can also eliminate frustration you may feel as you attempt to make repairs yourself or find someone else to do them. So, if you’re the type of person who likes to make one call and leave the rest up to the experts, a home warranty can ease some stress.

Finally, a home warranty can sweeten the pot for potential buyers if you’re selling your home. One recent study found that homes with a warranty sold an average of 11 days faster and for $2,300 more than those without a warranty. So if it’s still a buyer’s market in your area, spending a few hundred dollars on a home warranty that you can transfer to the new owners could help give potential buyers the push they need.

When to skip a home warranty

There’s a good chance you won’t need to request any repairs from your home warranty company, which means you’re out at least a few hundred dollars. And if you do need something fixed, you will still be paying a service fee or deductible on top of the initial price of your plan.

So if you don’t like the idea that you could potentially be paying for peace of mind — and that’s it — you’re probably best skipping the home warranty.

You may also not like the repair company your home warranty company sends to do the work, and you’ll have little control over the speed with which the repairs are done. So if you’re knowledgeable about home repairs, picky about who does them, or even handy yourself, a home warranty may cause more frustration than it’s worth.

In my case, it’s unlikely I would have purchased a home warranty had our builder not included one in our home’s purchase price. Though we did end up using the warranty for a costly fix, the chance of major breakdowns is low in a newer home. And as always, you can set aside money in your emergency fund (where it will earn interest, too) to cover unanticipated fixes.

To help homeowners determine if you need a home warranty for your appliance, we created the following table that lists high ticket items along with their average life expectancy, replacement costs, and repair costs. Of course, the costs are dependent on factors such as brand, type of repair, and location, but this will give you a good idea of where your appliances stand. All costs are national averages.

Appliance Life Expectancy (Years) Average Replacement Cost Average Repair Cost
Central Air Conditioning 7-15 $5233 $318
Furnace 15-25 $3881 $267
Range/Oven 14 $1932 $150
Water Heater 6-12 $1122 $480
Dishwasher 9 $898 $120
Refrigerator 9-13 $1624 $300
Washing Machine 5-15 $1153 $310
Dryer 13 $1125 $250
Garage Door Opener (per door) 10 – 15 $318 $195

How I Chose the Best Home Warranty Companies

Home warranty companies can be tricky to evaluate online. Reviews tend to trend suspiciously positive or frighteningly negative. For that reason, while I considered online reviews while making my picks, I gave them less weight than other factors. Here are all the criteria I considered when looking for the best home warranty:

  • Number of coverage options: It’s standard for home warranty companies to offer two coverage levels: a basic plan that covers appliances, and an enhanced plan that covers systems such as heating and plumbing. If a company offers a third hybrid plan, I considered that a plus. A customizable plan that allows you to pick the appliances or systems you want covered was an even bigger perk. Finally, the best companies offered a number of specialized add-ons for features such as pools, wells, and septic systems.
  • Customizable service fees or deductibles: Some companies allow you to customize the amount you pay when you request service. This also helps you control the cost of your plan — if you choose a higher service fee, your plan costs less overall.
  • Around-the-clock claims departments: If your furnace goes cold at 2 a.m. on a frigid Saturday in January, you probably won’t want to wait until 9 a.m. on Monday to report it. The longer you have to wait to report a problem, the longer you’ll wait for a resolution.
  • No exclusions on older homes and appliances: Buying an older home may be your primary motivator in purchasing a home warranty. The best home warranty companies don’t shun your business simply because there’s a greater chance you’ll make a claim.
  • Ability to easily receive a quote and purchase plan online: The best home warranty companies make receiving a quote very easy. During my evaluations, it had to be clear where I needed to start the quote process. And given that home warranties don’t vary much from person to person, the less personal information I had to enter, the better.
  • Solid reviews relative to the competition: Again, reviews are hard to evaluate for home warranty companies, so I based my evaluation on how they fared relative to competitors on particular sites such as Consumer Affairs, Home Warranty Reviews, and Yelp. A good rating with the Better Business Bureau was a bonus. Remember, the vast majority of negative reviews stem from customers who misunderstand their home warranty contract. Which leads me to my next consideration…
  • Sample contracts that are easy to find and view: Before you purchase a home warranty, it’s essential to read the fine print. That means reading the entire contract before you fork over your money. Otherwise, you risk joining the legions of frustrated customers who thought they were getting something other than what their contract specified.

The Best Home Warranty Offers Peace of Mind

After considering all of these criteria, the three providers I referenced above rose to the top during my search for the best home warranty company: American Home Shield, TotalProtect and Complete Appliance Protection.

However, remember the golden rule of home warranties: Read every word of the contract before signing up. And maintain a clear understanding of the pros and cons. Your home warranty policy is meant to keep you from paying big for unexpected fixes, but there are many limits. If you have realistic expectations about what your home warranty can do for you, you may find that the peace of mind is worth the price.