True story: Our four-year-old refrigerator died an ugly death late last year. After being diagnosed and fixed—more than once—by the same repair company, our warranty company finally authorized the purchase of a brand-new fridge.
We were, frankly, pleasantly surprised by how easy the process was and also chalked it up to financial karma for having paid $60+ every month for the last six years just to have the peace of mind of a warranty, plus $75 for each service call.
Those calls were few and far between, save for an annual air-conditioning issue and the occasional other appliance/plumbing concern. To our very unpleasant surprise, the company canceled our existing deal when our contract ended. Apparently, we had made “too many service calls.” This was, of course, code for “We had to replace your refrigerator and we need our $2,000 back.”
We were invited to reinstate our coverage—for 2 ½ times what we had been paying per month.
Welcome to the world of home warranties.
The truth is, we had minimal problems in the six years leading up to our refrigerator replacement. The tradespeople were generally fine, the service was as expected, and the fixes were typically timely. Being dumped by our company and having to scramble for new coverage wasn’t fun, but it definitely wasn’t the worst that can happen with home warranties. If you’ve bought a new home and are considering whether you should renew your warranty after your initial period is over, or are buying/have bought an older home and are mulling a warranty, here are a few things to think about.
For many people, the fact that they can pay a small amount every month that protects them against a potentially huge expense like an air conditioning issue, provides peace of mind. But ask yourself this: Are you better off putting that $60 or so in an interest-bearing account and saving for a what-if?
Also, just because you have coverage doesn’t mean everything will be taken care of by the company. “Some problems won’t be covered by the warranty, whether because the homeowner didn’t purchase coverage for that item or because the warranty company doesn’t offer coverage for that item,” said Investopedia. “Also, home warranties usually don’t cover components that haven’t been properly maintained. Furthermore, if the warranty company denies a claim, the homeowner will still have to pay the service fee and will also be responsible for repair costs. In addition, warranties have numerous exclusions, as well as dollar limits per repair and per year.’
Many companies have tiered offerings and the lowest tier is just basic coverage. “The cost of a home warranty ranges from $350 to $600 a year—more if you want enhanced coverage for such things as washers and dryers, pools and septic systems,” said Bankrate. “In addition to the annual premium, expect to pay a fee for service calls—anywhere from $50 to $125, depending on the type of contract you purchase.
Your barely running, 25-year-old air water heater may have been on its last legs for more than a decade, but if it can be fixed, a warranty company isn’t going to go out of its way to replace it. Same goes for other high-priced items.
“Most major home warranty providers include air conditioning as one of their covered systems. In most cases, a home warranty company is going to do everything it can to repair an AC system before replacing it,” said Consumer Affairs. “Be sure to check your contract for fine print on what AC components may or may not be covered. Also check for the maximum coverage limit listed in your contract for AC units. Remember, you will be responsible for paying for any cost above this dollar amount if your AC needs to be replaced. If you know your home is at risk of needing repairs or replacement of costly items like an AC unit, it’s worth it to look for a provider that has a generous per item coverage limit.”
Ask a friend, or give it a Google search and you’ll find lots of tales about frustrated and irritated homeowners ranging to horror stories about their home warranties. Ultimately, the choice is yours when it comes to opting for one—or not.
There are some other options you might want to explore before locking yourself into a contract. “Before buying a home warranty, learn what coverage you may already have,” said Money Talk News. “For example, if you’re buying a newly built home, know that: The home appliances and systems typically have one-year warranties. Most states require builders to warranty the home’s structural elements for up to 10 years. Also, when you buy new furnishings and appliances, use a credit card that extends the product’s warranty. That can add as much as an extra year of protection.”