If you are a homeowner, a home warranty can save you money on repairs—if you choose the right company.
In recent years, home warranties have grown very popular with homeowners who are looking to protect themselves from paying for expensive home and appliance repairs down the line. But are they worth the money?
The answer is: Maybe.
It depends on the company issuing the warranty and the homeowner’s needs.
Home warranties are especially common in real estate transactions. A home warranty can help sell a house faster and for more money because it provides the buyer with protection against the unknown.
Combined with a solid home inspection, a home warranty can give a homebuyer the level of comfort needed to seal the deal.
Basically, it’s an insurance policy for your house. For a set premium of from $350 to $500 or more per year, a home warranty company will issue a home warranty policy to a homeowner. In this policy, the company agrees to repair or replace certain appliances and major home systems if or when those appliances or systems break down.
If you have a home warranty and appliances or systems break down, you file a claim online or by phone.
Then the company sends a contracted service provider to your house or has you call a professional. You pay a service fee—typically from $50 to $100 for each repair. The service provider may fix the problem on the spot or may need to order parts and okay the repairs with the warranty company.
Depending upon the policy, you may have to pay for the entire repair up front and then get reimbursed by the warranty company for the portion covered by the policy.
If you’re buying a newly built home, you probably don’t need a home warranty. Many states require the home builder to repair defects in materials and workmanship for a few years (typically from two to ten years). And the new appliances in those new homes are almost always protected by one-year warranties.
Existing houses, however, are a different story. A used house may have considerable wear-and-tear and tend to be equipped with older appliances. If the house is filled with old systems and over-the-hill appliances that may require repair instead of replacement, a home warranty may make sense.
If you’re thinking, “Hmmm…maybe we can upgrade appliances to newer and better models with coverage from a home warranty,” you will probably be disappointed. Most home warranty policies won’t do this.
A typical home warranty company offers more than one tier of coverage. The more it covers, the higher the price.
A basic home warranty will cover a very specific list of appliances and systems such as:
• Plumbing and electrical systems
• Heating and ductwork
• Water heater
• Kitchen refrigerator
• Built-in microwave oven
• Trash compactor
• Garbage disposal.
Slightly better packages also cover the doorbell, burglar or fire alarm, ceiling fans, exhaust fans, central vacuum, washer, dryer and garage door openers.
An upgrade, costing an additional $100 to $300, might include exterior pools and spas, septic tank pumps, sprinkler systems and well pumps.
What isn’t covered? Read the fine print when considering a home warranty. The devil is in the details. A home warranty probably will not cover anything that isn’t specified. And it may not pay for some of the covered items if certain conditions are not met.
For example, most home warranties will not cover repairs that preexisted before the policy, and most have a 30-day waiting period. If you buy a house and something goes wrong with an appliance in the first 30 days, the warranty probably won’t cover it.
A home warranty may not provide coverage if an appliance was incorrectly installed or poorly maintained, or if it has been worked on before.
In addition, the entire cost of an expensive repair may not be covered. Many policies have a yearly limit—for example, $1500 to $2500 per year—and may have a deductible.
Search “home warranty reviews” online. In the results, look for the review sites that appear to be unbiased—those that are not selling advertising or leads to the companies they are reviewing. Then read through the reviews. Pay special attention to the bad reviews (some warranty companies load some review sites with false “good” reviews).
You’ll find that home warranty companies vary in quality, but many are notorious for balking at service.
If you work with the wrong company, they may drag their feet when you need a repair. If your home is without hot water, air conditioning, heat or electrical power, delaying repairs may force you to handle the problem yourself.
This may be exactly what they’re hoping will happen.
Be sure the home warranty company you choose is actually a company, not a local affiliate or lead-generation site. Search the company name on the Web and make sure it has a real address and note the contacts that you’ll need in the future if you have a problem.
Ask a lot of questions before you sign up, and confirm all of the answers you receive in writing.
Ask whether you have to call the home warranty company to request a repair in order for it to be covered. If you do, ask whether the company has around-the-clock phone service.
Find out who will be providing repair services in your area. Big national companies are more likely to have an extensive list of service providers. Check out the local service providers on online review sites to make sure they are reputable.
Everything should be detailed in the contract. Beware of contract wording such as “at our sole discretion” or “we reserve the right.” These are usually the first steps toward denying claims.
If you file a claim, get the name and contact information of the service person who comes to your home. Try to stay in the middle of the process so that the warranty company can’t claim that delays are caused by the contractor’s failure to send paperwork. One good practice is to make copies and send them yourself, via email, if necessary.
If you run into frustrating delays, tell the claims representative that you will be filing complaints with the BBB and online review sites unless they immediately pass your case to the “escalations team” or other supervisors. Get the names, direct lines, and email addresses of anyone you talk to.
Though home warranty companies have less-than-stellar reputations, careful research and oversight can ensure that the policy you select is a worthy form of insurance against unknown repairs.
This article, written by Don Vandervort, was originally posted at USNews.com