Home Warranty Policy? 

It won’t hurt, but will it help?

The Chicago Tribune reported recently that over three million homeowners bought home warranty policies in one year.  This dovetails a report from one of the nation’s largest warranty providers that claims houses with home warranty policies sell 11 days faster and for an average of $2,300 more than those without the policies.  Why then, are home warranty policy complaints so widespread and the policies despised by people like consumer advocate Clark Howard who say they’re a waste of money?  Perhaps the answer is in the belly of the beast, in what they cover and don’t cover.

Home warranty policies purchased on existing homes are quite different from more favorable comprehensive policies offered by developers on brand new houses.  Brand new houses typically come with a one year warranty on the appliances and major systems plus a ten year warranty that covers any structural defects.  Home warranty policies on used houses are more like limited service contracts and policyholders have no control who provides the service.

Buyers and sellers of existing houses like them, though, because for one year, they can relax, knowing that leaky pipes, broken heaters, or appliance break-downs can be fixed for a nominal service charge fee of $50-75.00. Typically, the warranty covers repairs to some combination of kitchen and laundry appliances, water heaters and furnaces, ceiling and exhaust fans and plumbing systems and circuit breakers.

But since the machines or systems are already used and in place, critics like Howard claim the policies are more like limited extended service contracts and are a rip-off because consumers have no say in deciding who comes to make the repairs and the policies often cover repairs but not replacement.  Home Warranty companies contract with their choice of vendors who may or may not be properly trained or equipped to do the work.

AngiesList.com recently tracked 500 categories of business service providers, and home warranty firms were the most complained about category. Consumers’ Checkbook, an independent non- profit publisher of consumer related articles reports that “instead of buying one of these policies – or placing any value in the one provided when you buy a home- you’ll do better to place that money into a home-repair fund.” 

Are they worth it?  While they won’t hurt, they may not help. Standard warranties on existing houses do not cover the more expensive repairs that escort home ownership.  They do not cover roofs, basements, and window issues.  Some charge extra for air conditioning systems and ventilation issues.  Other common exclusions include ice makers, “foreign objects” in toilets, etc.

What’s a new homeowner of an existing house to do?  If the seller adds a free policy to sweeten the deal, take it.  If not, shop carefully before buying a home warranty policy that may or may not provide the service you need.  Read up on the consumer complaints, and caveat emptor!  Don’t let the lure of ‘insurance’ lead you to faulty coverage.