5 Ways a Home Warranty Has Saved Us Money

Our monthly home warranty payment is one bill I never mind paying.

There was a time when we didn't have a home warranty, when everything that broke in our home was our financial responsibility. Depending on the house's condition when we purchased it, paying for everything ourselves could be expensive. There was also a time when we had the wrong home warranty. It helped cover service calls and most repairs, but only paid the depreciated value for anything that needed replacement. If a 10-year-old water heater went belly-up, the warranty company contributed the value of a 10-year-old water heater (next to nothing) toward installing a new one. In short, we paid 90%.

Not all home warranties are created equal. The first warranty on our current house was a stinker, and I've heard from friends who were unhappy with their home warranties. When we dropped the first warranty and shopped for a new company, I was unsure how much luck we'd have. Still, we had a wish list. When we shopped for a new home warranty, we looked for three things:

1. A policy that covered replacement cost
2. A company that would not reject applications (or exempt certain items) due to the age of systems or appliances
3. A policy with comprehensive coverage (in other words, one covering the greatest number of items)

A typical home warranty currently runs between $28 and $50 a month. Once we found a company that appeared to have what we were looking for, we sprang for the most inclusive warranty they offered. To protect our four-bedroom, four-bath house with two furnaces and two central air units costs us $63 a month -- the best $63 a month we spend. Here are five ways this warranty has saved us money.

1. Service calls

The average appliance service call runs from $50 to $150 per hour, according to Home Advisor. We pay a one-time fee of $75 whenever a service technician comes out, no matter how long the job takes. If they have to order parts and come back another day to install them, we are not charged another fee. Knowing we're only going to be out $75 if the refrigerator or water softener breaks makes the hassle a little easier to handle.

2. Repair charges

The furnaces were near the end of their lives when we purchased the home. The first few times either of them broke down, they could be repaired. We never had to pay a cent for those repairs beyond the service charge. One year, the furnace stopped working on New Year's Day, and still, a service technician came out and got it working again -- all for $75.

The average cost of a furnace repair is $303. Since our two furnaces were repaired four times in two years, it would have cost us around $1,200 without a home warranty. Instead, we paid $75 each visit, for a total of $300.

3. Replacement costs

After three years, both furnaces needed replacement. The average cost to replace and install each would have been in the neighborhood of $5,500. With our warranty, we paid $75 for a service call and $250 for a new plenum (the fabricated sheet of metal connecting the furnace to the ductwork). I'm not sure why that wasn't covered, but we were so glad to have a home warranty we didn't care about paying for the plenum.

In total, those two new furnaces would have cost us $11,000. Instead, we paid a total of $650 (two $75 service calls plus two $250 sheets of metal).

4. Insider deals

Because our home warranty company almost always sends the same local company out to make repairs, we've gotten to know the technicians pretty well. Not only have the techs offered us tips to make our systems and appliances last longer, they have also steered us toward the best deals on items we'd like to install. For example, when we mentioned that we'd like to replace a non-functional whole house humidifier, they told us how we could have it done for $350. The average cost to buy and install a whole-house humidifier is around $900, so we knew we were getting a deal.

5. Buying new

I like my house -- a lot. That said, the oven and dishwasher are two of the ugliest appliances I have ever seen. When I was younger and a little less wise, I would have replaced them while having hardwood floors installed and walls painted. But no. The home warranty will cover both appliances when they make their final bow, and I'm eagerly awaiting the day. Having a home warranty means not paying to replace anything the warranty will eventually cover.

So, how much has the home warranty saved us in total? We can ballpark it by focusing on the furnaces alone. Over the course of three years, we've paid $2,268 in warranty premiums ($63 x 36 = $2,268). We've also paid $450 for six service calls and $500 for new plenums. In total, we've paid $3,218 for warranty premiums, service calls, and materials not covered by the warranty.

If we hadn't purchased a warranty, we would have paid the entire cost of service calls, repairs, and replacing the two units -- which would have set us back by at least $12,200. We were able to put the money we saved toward other things, like investing for retirement.

I can't imagine ever taking out another mortgage without choosing the right home warranty to protect our interests. Still, our home warranty company offers a level of coverage that may not be offered by every company. That's why it is important to make a list of what you're looking for in a warranty, and shop around to find the company that best meets your needs. By purchasing the right home warranty, we saved nearly $9,000 and met some pretty clever technicians along the way.