If you were to take the value of all your core systems and appliances in the home, it would account for a significant portion of the total value of the home.
It's funny then that we wouldn't think twice about not getting home insurance, but many of us aren't even aware that home warranties exist. Surely your water lines, water heater, heat system, air conditioning setup, range oven, fridge-freezer, trash compactor, dishwasher and so on are important to insure for when they eventually wear out and break down? This is specifically what home warranties are for. For a premium which is usually around $500 per year or under, you don't have to worry about the wear and tear on such items. Of course, you still need to maintain them correctly in order to be contractually covered, but you don't have to worry about actually organizing and paying for the repair or replacement.
American Home Shield is a prime example of an established home warranty company. They have been operating for decades and price themselves above the market rate. As a result, though, you get a reliable service and a broad coverage package. At a reasonable premium, they offer perhaps the most comprehensive coverage plan on the market. The key here is that you can customize the coverage available, making it more bespoke to your own setup.
American are becoming increasingly aware of home warranties, too. Google Trends is the analysis of how many searches a particular receives in Google, which as can be seen below, has slowly been on the rise for the past five years (search term “home warranty”).
What’s interesting here is the cyclical nature of the searches - searches dip over winter/Christmas time and rise in the summer, reliably, each year. This could be down to a number of reasons, such as more insurance-worthy appliances being used in the summer such as swimming pools, or possibly down to ad-campaign timings from home warranty companies.
As we can see, Arizona, Nevada and Texas are the states that search for home warranties the most. These tend to be more rural states which are not very population-dense. Presumably, the reason then behind the popularity in these states is because improvising when something breaks down and finding a local repair man is much harder when there are fewer about. In the middle of San Francisco, it’s not going to be hard to find someone to come the same day and fix the issue, or visit the store for a replacement to be installed. In the more rural states however, waiting times can be much more predictable and in the hot weather of Nevada and Texas, a home warranty company can provide reliably, fast repairs for your AC unit when it blows out hot air.
That’s another reason, too - the weather. Texas has extreme weather, which makes us even more reliant on our appliances. If the fridge or freezer breaks in New York during the winter, you can pretty much put it in a bag outside. As a result of this huge demand, there is a large variety in Texas regarding home insurance providers, services and coverage plans. This means customers generally get a better service, because they have more options and liberties to filter out the mediocre ones.
The public are increasingly becoming aware that they exist. The increased coverage in the media and news has also contributed to this awareness. Not always for the good, though, as there have been several stories about claim denials or scams from home warranty firms.
Arguably the main cause of this rise in popularity is because people are becoming more frugal and money literate. In modern America today, there feels although there is no security. The average person has very little savings, job security is under threat, yet there is a trend recently in becoming savvy regarding money management and minimalism.
For those good with money, the key way to budget is to guarantee your monthly outgoings. When you can guarantee it, you can manage it. Thus, paying a premium for home warranty tends to outweigh waiting for a major payout when something big goes wrong. And if we take those who are bad with money management, they simply haven't got a penny in savings in case something does go wrong, so many are still turning to home warranties (albeit to a lesser degree than those who are apt with money). Thus, home warranties are appealing to almost any demographic, other than those with a large amount of savings who have a good relationship with local tradesmen.