Key takeaways:
What exactly is a deductible? While it’s typically a term discussed in relation to health, car and home insurance policies, a deductible can also be applied to your home warranty plan.
With a home warranty plan, you’ll typically pay a yearly premium for coverage. Also, like health insurance, paying a lower deductible often means paying a higher premium.
Today, we’ll examine the role of deductibles in home warranty plans and explain what you need to know about them when choosing one.
Do deductibles matter for home warranties?
Simply put, yes — they matter. If you’re a homeowner with a home warranty plan, getting familiar with your deductible and how it works can prove extremely helpful.
Here are three important things you should know about deductibles and home warranties.
- As stated above, deductibles are flat fees you'll pay before repairs start.
- Usually, deductibles are nonrefundable.
- Your policy may include restrictions and there be certain costs associated with repair that typical home warranties do not cover. This means you may have to pay more than just your deductible.
Do all home warranties have deductibles?
Yes, home warranty plans typically include deductibles for repairs. However, different kinds of deductibles are often associated with home warranties. Here’s a quick breakdown.
Service call deductibles
A service call deductible is how much you'll pay out of pocket before a service technician goes to your home to repair a covered appliance or system. This is similar to a copay you pay when visiting a doctor's office. Keep in mind that this is different than a service fee.
For a home warranty claim the deductible is the out of pocket the customer pays to initiate the claim, have the warranty company send the service provider out and for the service provider to give the diagnosis. If the amount of the repair and the service fee are less than the cost of the deductible, then the deductible will be all the customer has to pay to have the item repaired.
However, if the repair is going to cost more, or is subject to caps, or there are non-covered charges, then the customer pays both the deductible, plus any costs not covered by the warranty.
Trade-specific deductible
Let's face it: not all repairs require the same effort, skill and time. Some warranties have trade-specific deductibles where you pay a different amount based on the service technician needed to repair your covered appliance or system. For instance, the amount you pay for an A/C technician to service your A/C system may be less than what it would cost for you to get your dishwasher repaired.
How much is a home warranty deductible?
ConsumerAffairs states, “The deductible typically ranges from $75 to $150, depending on your plan.” Remember to factor this into your budget when researching the cost of a home warranty plan.
Are home warranty costs tax-deductible?
No.
The associated costs are not tax deductible if your home warranty is on your primary residence. However, there are a few instances where some or all of the costs of a home warranty plan may be tax deductible. Some of these exceptions are:
Home offices: If you use part of your home as a home office, you may be able to deduct a portion of your home warranty costs.
Rental property: Another exception is if you use the home you have a warranty on a rental property. In this case, your service fees and premiums may be written off as an operating expense of the property. Make sure that you save receipts and credit card statements to back up your operating expenses.
Client gift: If you are in the real estate business, a common practice is to buy a home warranty policy as a gift. If you have purchased a home warranty plan for a client, the associated costs may be written off as a business expense. Be sure to consult an accountant.
Is the home warranty deductible the same for different appliances?
For many home warranties your deductible is the same for all appliances. If your claim is on a covered appliance or system, the deductible will remain the same, no matter which appliance breaks down. If you have multiple claims, you may pay more than one deductible if different trades are involved in the repairs. For example, if the refrigerator is not cooling, and the sink is leaking, you might have to pay both an appliances and a plumbing deductible to open the claims even though you are placing them at the same time.
Do your research before you purchase a plan.
According to a survey conducted by USA Today, homeowners spend almost $6,000 per year on home maintenance. With that in mind, having the right home warranty plan may be a great way to save money. Here are some things to remember to ensure you choose the right home warranty plan.
Choose the right company.
When you compare home warranty companies, do your due diligence and don't make a rash decision. How long has the company been in business? Have they been approved by the Better Business Bureau? Are they upfront and have a clear fee structure that you can understand? If you can confidently answer all of these questions positively, these are clear indicators that you are getting into a contract with a reputable company.
Assess the age of your appliances/home.
If you have an older home, you may consider getting a plan with a lower deductible and a higher premium. Since you would expect to have more frequent repairs, you could select a plan that charges you less per service.
Know exactly what's covered.
Before you choose a home warranty plan, make sure that you ask the right questions and know exactly what kind of warranty coverage you’re getting. For instance, many appliance-based plans won't cover your HVAC. So, if your main reason for getting a home warranty is because you fear your HVAC will stop working, you may want to invest in a plan that covers HVAC. Thankfully, here at Cinch Home Services, we offer a variety of plans for you to choose from. Remember, the right home warranty* plan fits your budget and needs.
*The product being offered is a service contract and is separate and distinct from any product or service warranty which may be provided by the home builder or manufacturer.
The information in this blog library is intended to provide general guidance on home warranties, and on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.
Our blog library may link to third-party sites that offer products, services, coaches, consultants, and/or experts. Any such link is provided for reference only and not intended as an endorsement or statement that the information provided by the other party is accurate. We are not compensated for any products or services purchased from these third-party links.