Home Warranty Calculator
The contract & your claims
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- United States — state and local practice
- Scope and limitations
- Educational estimate only. U.S. real estate costs are local: property tax rates, transfer and recording taxes, title practice, who customarily pays which closing cost, and landlord-tenant rules all change by state and often by county or city. Agent commission is negotiable and, since the 2024 NAR settlement, buyer-agent compensation is negotiated separately rather than assumed. Only a lender's Loan Estimate, a title company's fee sheet or a signed contract binds a number.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the annual premium and the service fee charged per visit.
- 02
Enter how many claims you expect a year and what an average repair would cost without cover.
- 03
Open Advanced options for the denial rate, the annual coverage cap, and the return on money you would bank instead.
- 04
Read whether the warranty saves or costs you money in a typical year.
- 05
Check the break-even claims figure. If it is above what you realistically file, the contract is not for you.
Formula
Covered claims are the expected claims reduced by the denial rate; the rest are denied and you pay them in full. Your out-of-pocket with the warranty is the premium, plus the service fee on every covered claim, plus the full cost of every denied one, plus anything above the annual coverage cap. Without the warranty it is simply the claims times their average cost. The annual net is the difference, positive when the warranty wins. The break-even claim count is the premium divided by the expected saving per claim filed, where that saving is the repair cost less the service fee with the denial rate already applied — so the answer is claims filed, not claims approved — and when a repair costs less than the service fee the warranty can never pay for itself, so the page says so instead of printing a number. Over the horizon, the comparison banks the difference between the two paths each year at the return you set, so a pot that grows is the honest measure of self-insuring rather than a simple subtraction.
Example
A $650 annual premium with a $100 service fee, two expected claims a year averaging $550, a 25% denial rate and a $3,000 annual cap. Covered claims: 2 x 75% = 1.5. Denied: 0.5. Service fees: 1.5 x $100 = $150. Denied repairs you pay in full: 0.5 x $550 = $275. Covered repairs total $825, under the $3,000 cap, so nothing spills over. With the warranty: $650 + $150 + $275 = $1,075. Without it: 2 x $550 = $1,100. The warranty saves $25 a year. Over five years, banking the difference, it wins by $141. That is as close to a coin flip as a financial product gets, and it is the honest answer for a typical household. The break-even is 1.9 claims filed a year — so filing two annually with three quarters approved puts you fractionally over the line, which is what the $25 is. What moves it decisively is the denial rate and the cap. Push denials to 40% and the warranty loses $135 a year. And the cap is the quiet risk: the repair most likely to justify the contract is an HVAC replacement at $8,000 to $15,000, against a $3,000 cap that leaves the majority with you.
Definitions
- Home warranty
- A service contract covering breakdowns of systems and appliances. Not insurance.
- Service fee
- A charge per dispatch, commonly $75 to $125, paid whether or not the claim is approved.
- Coverage cap
- The maximum the contract pays, annually and often per item. Frequently below the cost of an HVAC replacement.
- Denial rate
- The share of claims refused, commonly for pre-existing conditions or improper maintenance.
- Pre-existing condition
- A fault present before coverage began. The largest single exclusion in most contracts.
- Self-insuring
- Banking the premium and paying repairs yourself. Requires discipline and a buffer.
- Break-even claims
- The number of claims a year you must file for the warranty to pay for itself, denials included.
- Covered claim
- A claim the contract approves, on which you pay only the service fee.
- Network contractor
- The technician the warranty company dispatches. Usually not your choice.
- Seller-provided warranty
- A one-year policy included with a home sale, often as a marketing inclusion.
- Homeowners insurance
- Covers sudden disasters — fire, wind, water damage. Distinct from a warranty, and not replaceable by one.
- Maintenance reserve
- Money set aside for upkeep. The self-insurance route, and broader than any warranty.
Good to know
A service contract, not insurance, and the difference matters
Homeowners insurance covers sudden, accidental loss — fire, wind, a burst pipe, theft — and is regulated as insurance in every state, with a guaranty fund behind it. A home warranty is a service contract covering mechanical breakdown of listed systems and appliances, and in most states it is regulated far more lightly, sometimes by the insurance department and sometimes not at all. The two do not overlap and neither substitutes for the other. A warranty will not pay for a roof, a foundation, storm damage or anything structural. Insurance will not pay for a fifteen-year-old furnace that simply stopped working. The households that get into trouble are the ones who bought a warranty believing it covered the house, and discovered the boundary at the moment a claim was denied.
The economics require most buyers to claim less than they expect
At the defaults here the warranty wins by $25 a year — as close to a coin flip as a financial product gets, and that is the honest typical case rather than a pessimistic one. The break-even is 1.9 claims filed a year, of which about 1.4 would be approved, and many households file fewer. The industry is profitable, which means in aggregate premiums exceed claims paid plus administration, which in turn means the average customer loses money by design. That is true of most insurance too, and the reason to buy insurance anyway is that it covers a loss you could not absorb. A warranty covers losses in the $200 to $2,000 range, which most homeowners can absorb, and caps out below the cost of the one repair — a full HVAC replacement — that they cannot.
Where claims get denied, and why the rate is high
A 20% to 35% denial rate is realistic and the grounds are consistent: a pre-existing condition, meaning a fault present before coverage began whether or not you knew about it; improper or undocumented maintenance, which is why contracts ask for service records; improper installation, often by a previous owner; a code violation the repair would have to correct; and specific exclusions — refrigerant, ductwork, permits, haul-away, and anything the contract calls a component rather than a system. The service fee is paid whether or not the claim is approved, so a denial costs $100 and delivers nothing. The most useful thing a buyer can do before purchasing is read the exclusions section rather than the covered-items list, because the covered-items list is the marketing and the exclusions are the product.
The cap is the risk the arithmetic understates
Annual and per-item caps of $1,500 to $3,000 are standard, and the single repair most likely to justify a warranty is exactly the one that exceeds them. A full HVAC system replacement runs $8,000 to $15,000 installed; a $3,000 cap leaves the majority with the homeowner, on top of the premium and the service fee. Some contracts also cap by category, exclude the cost of bringing an installation up to current code, and exclude the refrigerant line set — which on a modern replacement is a substantial part of the job. When comparing contracts, the caps and the code-upgrade exclusion move the value far more than the covered-items list does. A contract with a lower premium and a $1,500 cap is usually worse than one with a higher premium and a $10,000 cap, and the price difference between them is often small.
Where a warranty genuinely earns its price
Three situations. An older home with aging systems the owner could not afford to replace outright, where the value is smoothing a risk rather than winning on average. A landlord who wants predictable costs and, more usefully, a dispatch service that takes the tenant's 11pm call about the water heater — the logistics are worth more than the arithmetic there. And a seller offering one to reassure a buyer about older systems, which works better as a marketing inclusion than as a financial product. Outside those, the alternative is self-insuring: bank the premium, add it to the maintenance reserve, choose your own contractor, and keep the money you do not spend. The Home Maintenance Calculator sizes that reserve, and for most owner-occupiers it is the better structure — provided the money actually goes into the account.
Frequently asked questions
Is a home warranty worth it?
It depends on the claim count and the denial rate, and the honest answer for most households is marginal. At two claims a year averaging $550 it roughly breaks even. At one claim a year it loses money clearly. The industry's economics require most buyers to claim less than they expect.
What is a home warranty?
A service contract covering breakdowns of systems and appliances — HVAC, plumbing, electrical, water heater, kitchen appliances. It is not insurance, and it does not cover disasters, structure or anything a homeowners policy handles.
Why do so many claims get denied?
The common grounds are pre-existing conditions, improper maintenance, code violations, improper installation, and parts the contract excludes. A 20% to 35% denial rate is realistic, and the denial usually arrives after the service fee is paid.
What is the service fee?
A charge per visit, commonly $75 to $125, paid whether or not anything is fixed and whether or not the claim is approved. It means the warranty saves nothing on any repair costing less than the fee — which is a large share of small repairs.
What is the coverage cap?
A limit on what the contract pays in a year, and often per item. Caps of $1,500 to $3,000 per item are common, which matters because the item most likely to need replacing — an HVAC system at $8,000 to $15,000 — exceeds them comfortably.
Can I choose my own contractor?
Usually not. The warranty company dispatches from its own network, and you take who is available. That is the trade for the coverage, and it is the most common source of complaint — response times and quality vary and you have little recourse.
Do sellers offer these?
Often, as a one-year policy included with the sale. Free coverage for a year is worth taking. The question this page answers is whether to renew it, which is a different decision made with a year of actual claim experience.
Does it cover pre-existing problems?
Generally not, and this is the largest exclusion. Contracts typically exclude conditions that existed before coverage began, whether or not you knew about them — so buying a warranty because the furnace is making a noise is unlikely to work.
How does self-insuring work?
You bank the premium instead of paying it, and pay repairs from the fund. Over time the fund grows and the repairs come out of it. It works when you have the discipline to leave the money alone and enough of a buffer to survive an early large repair.
What is the break-even claim count?
The premium divided by the expected saving per claim you file, which is the repair cost less the service fee with the denial rate already applied. On these defaults it is 1.9 claims a year — more than many households file, and of those only about 1.4 would be approved.
Does a warranty help when selling?
Modestly. Offering one can reassure a buyer about older systems, and it is cheap relative to the sale. As a marketing tool it works better than it does as a financial product.
When is one clearly worth buying?
An older home with aging systems you cannot afford to replace, or a landlord who wants predictable costs and a dispatch service for tenant calls. In both cases the value is the smoothing and the logistics, not the arithmetic.