A service contract is a bet on the future. You pay a fee now in exchange for a promise to cover certain repairs later. Whether the bet is worth making depends on how much you would spend on repairs yourself, how likely those repairs are, and what the contract actually pays. The break-even question asks a simple thing: at what point does paying the contract cost less than paying the repair bills directly? The answer is different for every home and every set of appliances.
Terms you will need for the sum
A service call fee is the flat charge some contracts apply each time a technician visits, whether or not a repair results. A waiting period is the stretch after a contract starts during which certain items are not yet eligible for repair. An annual cap is the most a contract will pay toward covered repairs in a contract year. An obligor is the company named in the paper as responsible for carrying out the contract's promises. Each of these affects the sum, so read them in the paper before you start.
Step one: list what the contract covers
Start with the systems and appliances you actually care about. For each, write down whether the contract covers it, whether a waiting period applies, and whether the item is already protected by a manufacturer's warranty. Items that are already covered elsewhere for a while do not add much value in the short run. Items the contract covers that are old, expensive to repair or hard to replace are the ones that drive the comparison.
Step two: estimate the out-of-pocket cost
For each covered item, estimate what a repair would cost you if you paid for it yourself. Ask a local trade for an estimate for a common repair, and keep the estimate on file. Do not rely on a single guess. Use your own figures rather than a company's marketing claims, because the purpose is to match your home, your location and your equipment.
Step three: add the costs of the contract
Add the yearly fees, any service call fees you expect to pay on each visit, and any amount you would pay for items the contract excludes or limits. Then compare that total to your out-of-pocket estimate over the same period. Remember that a service call fee is paid even when a visit does not end in a covered repair, so count visits, not only successful claims.
Step four: check the limits
An annual cap can turn a plan that looks generous into one that pays little on a large bill. If your most likely repair is larger than the cap, the contract will leave a gap that you must fill yourself. Also check whether the contract pays for parts and labor in full, or whether certain items are excluded or limited. These details decide whether the sum in step three is fair.
Step five: decide what you can carry
Even if the numbers favor a contract, ask whether you could absorb an unexpected large repair without strain. Some homeowners prefer to keep a reserve and pay for repairs directly, accepting the risk of a large bill in exchange for avoiding fees. Others prefer the predictability of a contract. Neither choice is wrong. The break-even question simply makes the trade visible.
Where to compare the published figures
The published terms for the companies on this site are set out in the flagship table, and the companies can also be viewed sorted by waiting period in Home warranty companies sorted by waiting period. Use those pages to fill in the sum, and check the paper of any plan you are considering before you commit.