Is a Home Warranty Worth It? The Honest Math
A home warranty trades a monthly fee and a service charge for help when an appliance or system breaks. Whether that's a good deal depends on your house, your savings and the fine print.
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In this guide
Home warranties have a reputation problem, and some of it is earned. Ask around and you’ll hear about denied claims and slow repairs. You’ll also hear from people whose warranty covered a big repair for the price of a service fee. Both stories are true. The question isn’t whether home warranties are good or bad; it’s whether one makes sense for your particular house and bank account.
The short answer
A home warranty makes the most sense if your major systems and appliances are older, you don’t have a few thousand dollars set aside for repairs, and you’d rather pay a predictable monthly bill than face a surprise. It makes the least sense in a newer house, or if you can build and keep a repair fund yourself. Whatever you decide, read the contract’s exclusions and coverage caps before you buy.
Two homeowners buy the same warranty plan. One files a claim for a dishwasher that stopped draining, pays the service fee and has it repaired within the week. The other files for a leaking water heater and is denied, because the contract excludes failures it attributes to lack of maintenance. Same company, same plan; the fine print decided both outcomes.
What a home warranty is, and isn’t
The Federal Trade Commission describes home warranties as service contracts: you pay extra for a set period, and the company covers repairs or replacements for items like appliances and air conditioning. They’re different from the warranty a builder gives on a new house or a manufacturer gives on a new refrigerator, which come with the purchase.
They’re also not insurance. Your homeowners policy pays for sudden damage from things like fire, wind or a burst pipe. It doesn’t pay when a furnace simply wears out. That’s the gap a home warranty is built to fill. (For what your insurance doesn’t cover, see the gaps in a homeowners policy.)
What it costs
There are two costs, and you need both to do the math.
The plan. Consumer Reports gathered quotes ranging from about $600 a year for major systems in southwestern Ohio to about $1,200 for systems plus appliances in Westchester County, New York. NerdWallet’s 2026 review of American Home Shield, one of the largest providers, found monthly prices from about $30 to $120 depending on location and plan.
The service fee. Each time a technician comes out, you pay a fee. American Home Shield lets you choose $100 or $125; a higher fee lowers the monthly price.
What it won’t pay for
This is where most of the bad stories come from. Consumer Reports lists the common gaps:
- Pre-existing conditions, even ones you didn’t know about when you bought the plan.
- Missed maintenance or improper installation. Keep your service receipts.
- Partial coverage. For example, a refrigerator plan that excludes the icemaker.
- Coverage caps. Some plans pay only up to a fixed amount per item, which can fall short of a full replacement. NerdWallet reports American Home Shield’s caps at up to $5,000 each for heating, air conditioning and ductwork repairs.
- Non-mechanical parts of the house, like windows and the structure, are generally excluded.
The FTC adds three more things to check before you sign: cancellation fees and limits, how easy the claims process is, and the company’s complaint history. Search its name with “complaint” and “review.”
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The honest math
Here’s the comparison to run, with your own numbers.
The numbers
| Home warranty | Save it yourself | |
|---|---|---|
| Yearly cost | About $600–$1,200 for the plan | $600–$1,200 set aside in a repair fund |
| Each repair visit | A service fee, often $100–$125 | The full repair bill |
| Big replacement | Covered up to the plan’s cap, if the claim is approved | Paid from the fund, or financed |
| After a quiet year | The fee is spent | The money is still yours |
Plan and fee ranges: Consumer Reports (2025) and NerdWallet’s 2026 American Home Shield review. Your quotes will differ by location and plan.
A simple way to think about it: a warranty is a bet that something covered will break, the claim will be approved, and the repair will cost more than you’d have paid in fees. That bet looks better as your house gets older. InterNACHI’s estimates put a central air conditioner at 7 to 15 years, a tank water heater at 6 to 12, a dishwasher at about 9, and a gas furnace at 15 to 25. If several of yours are near the end of those ranges, a single furnace replacement, which This Old House puts at about $4,800 on average in 2026, could exceed several years of warranty fees.
The bet looks worse in a newer house, where Consumer Reports notes that builder and manufacturer warranties usually cover the appliances for the first years. Consumer Reports has long suggested a third route for many people: put the warranty money into a dedicated repair or emergency fund instead.
Who it makes sense for
Probably a good fit: - Your furnace, air conditioner, water heater or major appliances are past or near the middle of their expected lives. - You don’t have a repair fund, and a $5,000 surprise would go on a credit card. - You’d rather not find and vet contractors yourself. - You just bought an older house and don’t know its history. (Sellers sometimes include a first-year plan; ask.)
Probably not: - The house or its major systems are new. - You have, or can build, a repair fund of a few thousand dollars and leave it alone. - You want to choose your own contractors; most plans assign one.
Before you sign
- Get the sample contract, not the brochure, and read the exclusions and caps for your furnace, AC and water heater.
- Ask how pre-existing conditions are handled and whether there’s an inspection.
- Check the service fee and how many visits a typical repair takes.
- Ask who chooses the contractor and how fast they respond in your area.
- Read the cancellation terms.
- Keep maintenance records, so a claim can’t be denied for neglect.
- Look up complaints with the Better Business Bureau and your state’s consumer protection office.
Your next step
Write down the age of your furnace, air conditioner, water heater and major appliances. Our guide to how long things last has the typical lifespans. If three or more are near the end and you don’t have a repair fund, get two or three warranty quotes and compare the contracts, not the prices. If not, open a savings account, name it “house,” and set up an automatic transfer for what a warranty would have cost. Either way, keep your systems maintained with our fall-to-winter checklist.
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Questions readers ask
What's the difference between a home warranty and homeowners insurance?
Homeowners insurance pays for sudden damage from events like fire, wind or a burst pipe. A home warranty is a service contract that pays to repair or replace covered systems and appliances when they break from normal wear and tear.
How much does a home warranty cost?
Consumer Reports found annual prices from about $600 to $1,200 depending on location and plan, and you pay a service fee each time a technician visits, often $100 or more.
Why do home warranty companies deny claims?
Common reasons Consumer Reports lists include pre-existing conditions, missed maintenance, improper installation, parts that aren't covered, and coverage caps lower than the repair cost.
Is a home warranty worth it for a new house?
Usually not. New homes and appliances are typically covered by builder and manufacturer warranties for the first years. Warranties make more sense for older homes with older systems.
