Home warranty deductibles: what to know
Home warranty fees explained
Home warranties operate similarly to insurance. You pay a yearly premium for coverage, and if a covered appliance or home system breaks down, you pay a deductible before you can get a repair. And just like with insurance, paying a lower deductible means you will pay a higher premium.
Generally, deductibles help home warranty companies lower costs while preventing frivolous claims. Here’s how they work.
Key insights
- Deductibles are flat fees paid before repairs can begin.
- Deductibles are typically nonrefundable.
- You may have to pay extra to repair or replace an item if the cost is higher than your policy’s cap.
What are the types of home warranty deductibles?
Home warranty companies typically only require you to pay just one deductible before a repair technician visits your home, but there are some terms that can be confusing. Understanding the terms home warranty companies use can help you steer clear of surprise fees.
Service call deductibles
A service call deductible is the amount you pay out of pocket when a repair person comes to your home to fix a covered item. It's a bit like paying a copay when you visit the doctor.
The deductible is different from a service fee. A service fee is the charge that occurs when a service provider arrives at your home.
“Think about this fee as paying for the service provider to come out, inspect and diagnose the issue – with no repair taking place,” said Farah Sutton, a real estate agent in Phoenix. “A deductible is paying a portion of the repair work.”
Usually, though, the deductible and the service fee are both rolled into one flat fee. The fee is not refundable, even if the service technician decides your claim isn’t covered by your policy.
Trade-specific deductibles
A trade-specific deductible, or trade service fee, is an additional fee if a specific type of technician has to be called to do your repair, like a plumber or electrician. Not all policies have trade-specific deductibles. If a trade-specific deductible is not mentioned in your contract, this deductible is probably folded into the overall deductible you must pay before a repair person is called to your home.
Annual deductibles
An annual deductible is another term for annual premiums. All home warranty companies have an annual premium. These costs will vary depending on the coverage you choose, but they usually range from $264 to $1,425.
» LEARN: How much does a home warranty cost?
How does a home warranty deductible work?
Let's say your dishwasher takes an unexpected break and stops washing dishes. You know it's covered under your home warranty, so you call the warranty company. Before the technician gets to work, you need to pay the service call deductible. This is usually a flat fee, and it's outlined in your contract. The deductible typically ranges from $75 to $150, depending on your plan.
Once you pay the fee, the company puts you in touch with a local technician to set up an appointment. If the problem is covered under your warranty, the technician will fix it without an additional cost to you (unless the repair cost exceeds the coverage limit).
Those costs typically will be less than if you had to cover the whole cost of the repair yourself, but will still sting a bit when you haven’t planned for that expense. ”
Most warranty companies will allow you to submit two to three issues under one deductible or service fee if they are the same trade.
“For example, if your toilet is running, but you also have a leaking garbage disposal and a dripping tub spout, which would all be considered plumbing-related, many warranty policies will allow you to submit all three as one claim,” said Melissa Zimbelman, a real estate agent and property manager with LUXE Realty in Nevada. “So, before you submit a claim, walk around your house to see if there are any other plumbing-related issues that you can submit at the same time. Check your specific policy to verify if yours allows for that.”
Sometimes, you'll have to pay more than the deductible sometimes. This happens when the cost of the repair exceeds the coverage provided by your specific policy or if the repair requires something that would be considered a noncovered cost.
You may have to pay more than your deductible if the cost of a repair is more than the financial cap set by your home warranty contract.
“As an example, if you have a Sub-Zero refrigerator that needs a new compressor, your policy may have a limit to how much it will pay out each policy period,” said Zimbelman. “If the cost of the refrigerator compressor exceeds the policy limit, they will ask you to cover the difference, or they will offer what is called a ‘cash-out,’ where they will send you the amount they would have paid out, and you will have the repair completed yourself, by a licensed contractor.”
If this situation occurs, they will not cover the item again until you have provided proof of payment to a licensed contractor for the repair.
Another example is an air conditioning claim. If a new unit installation requires updates to the electrical system, your warranty may not cover that portion of the claim. The warranty company will quote you those costs as noncovered fees you're be responsible for.
“Those costs typically will be less than if you had to cover the whole cost of the repair yourself, but will still sting a bit when you haven’t planned for that expense,” Zimbelman said.
Why do home warranty plans have deductibles?
The warranty companies charge a deductible to help offset the cost of the repairs when you file a claim. Deductibles are also used by home warranty companies to discourage policyholders from submitting frivolous claims.
“The warranty companies know that if you have to pay a fee, you aren’t likely to submit a claim that you could have resolved yourself,” Zimbelman said. “This keeps their costs down as well.”
FAQ
Are home warranty deductibles a fixed amount?
Your deductible is a fixed amount that is laid out in your contract at sign-up.
Can I choose my home warranty deductible amount?
Many home warranty companies will allow you to choose a deductible, ranging from $75 to $125 — though some have a fixed amount. Choosing a smaller deductible means you will pay a higher annual premium.
How does the deductible affect the cost of the home warranty plan?
Generally, you pay a yearly premium and are only charged a deductible if you make a claim. The more claims you make, the more you pay the home warranty company. You can often lower your deductible by paying a larger yearly premium.
» Compare: Cheapest home warranties
Are all repairs covered by the deductible?
Only repairs outlined in your agreement are covered by the deductible. There are often caps to how much the home warranty company will pay for repairs or replacements.
When do I pay the deductible?
Most companies will make you pay the deductible before they order service for your repair.
Are home warranty deductible payments tax deductible?
Not typically. The exception may be if the repair is for your home office or a rental property. Ask a tax professional before using your deductible as a tax write-off.
Bottom line
Home warranties cover you when things go wrong around your home so you don’t need to pay a large repair or replacement bill out of pocket. The trick with deductibles is finding one you can afford when surprises come up. Look for a home warranty company that has both a reasonable yearly premium and deductible.
Article sources
- Federal Trade Commission, “ Warranties for New Homes .” Accessed Aug. 14, 2023.
