Lorraine Labonne-Storch opted not to buy a home warranty when she bought a house in New Jersey seven years ago. The home inspector had told her the boiler was on its last legs, but she didn't want to pay the $500 fee for the warranty. (Bing: Check out home-warranty companies)
Less than a week after closing, her boiler burst into flames and had to be replaced for $12,000. Labonne-Storch now regrets her decision to skip the home-warranty coverage. As she learned, a home warranty can pay for itself in one visit from a repairman. And that includes the $100 deductible that many plans have for a service call.
The home warranty would have covered only up to $1,600 for repair or replacement of the boiler, but "any little bit would have been helpful," she says.
Labonne-Storch is now a real-estate agent, and she says her first advice to buyers is to purchase a home warranty. "When a buyer is buying a home, you have to keep in mind that these are used items," she says. "You never know, because the last thing you want to do is spend big money on big-ticket items."
What warranties cover and how much they cost
A home warranty can be an inexpensive insurance policy for a buyer who purchases a home that has old appliances, or for new homeowners who don't know the age of the appliances or home systems they're inheriting.
In addition to charging a small deductible, home-warranty companies typically place some limits on what they'll fix.
- On our blog, 'Listed': View of homeownership shifting
"Their goal is to keep the prices reasonable," says Stephen McDaniel, assistant general director at the Service Contract Industry Council. "And they can look at the lifetimes on certain appliances."
A typical home-warranty plan might cover air conditioning and heating with ductwork, electrical systems, plumbing (including stoppages), clothes washers and dryers, dishwashers, ranges and ovens, refrigerators and water heaters.
- MSN Money: 6 things to know about warranties
When is a home warranty a good deal?
Knowing the average life span of an appliance can help determine if buying a home warranty is a good deal. Even with new appliances or home systems, the original equipment manufacturer warranties can be less than a year. Today's appliances and systems have a lot of technology packed into them, meaning a lot more things can break, McDaniel says.
Article continues below
McDaniel recommends getting a copy of the contract before buying a warranty and going with a company that offers good phone support. Some companies require annual maintenance on appliances to keep the warranties valid, and some may ask for the approximate date of purchase for appliances.
Warranty companies require users to call them to schedule a repair, which will be done by a contractor the company chooses. If you own a home and plan to sell, you should know that these contracts typically can be transferred to a new owner, giving peace of mind to potential first-time homebuyers.
When is a home warranty a bad deal?
There are times when a home warranty may not make financial sense. A newly constructed home or one with new kitchen appliances may not need to be backed by a warranty. Bob Schacke, a home inspector in Chicago who gives his clients 90-day warranties, says most appliances have an average life span of 11 years, so any appliance that’s less than 11 years old is probably in good shape and won’t require a warranty.
Schacke recommends reading a warranty's fine print, because some warranties won't cover old appliances. At that point, it's "buyer beware," he says.
As is the case with any extended warranty you buy, several clauses in the contract could render the warranty useless. For example, all systems must be operational for the contract to be valid. If standard maintenance isn't done, such as cleaning the air-conditioner coils regularly, a repair request might not be covered.
Lastly, another drawback of home warranties is that you can't select the repair company you work with. If you had a repair company you liked working with in the past, it may not be contracted under the warranty company's network.
Labonne-Storch says checking into a home warranty is as common as researching the lowest mortgage rates when buying a home. She now has a home warranty from her utility company that costs only $21 a month and doesn't require a service fee. It covers her washer, dryer and refrigerator.
The contract has paid for itself, says Labonne-Storch, who has used the service five times in six years.
Yes, I am very happy after visiting this site. You have shared very useful information. Great work.
I have had a home warranty and yes they do pay for themselves for high cost repairs. However, companies like American Home Shield have the WORST companies that they contract with. I had HORRIBLE experiences with the HVAC and plumbers they contract with. The HVAC people sabotage my air unit and opened the valve ( I am not a HVAC repairman so my description is that of a layperson) for my freon ever so slightly so they could come back two years in a row to recharge my unit. It was not until I had an outside company come look at it that they said my freon was not leaking, it was being leaked on purpose. The plumbers WAY over charged for "pulling permits" to install a hot-water heater.($300 NOT covered by the home warranty) only for me to find out from the county inspector that there was NO need for permits on a current residence. The only time a permit was needed for plumbing install was on a new construction. AHS tried everything in the book to try and NOT pay for other visits saying they were "not covered" as per the contractor they sent out. When I researched the companies they were sending me to do work, ALL of them had F ratings with the BBB and "you really suck" ratings on Angie's List. I contacted AHS and told them my findings and all they said they could do was put them on a "do not send" notice on them so I did not get them for service again. Check with the warranty company and ask them who they are contracted with for every specific thing (HVAC, plumbing, electrical, appliance service etc.) and research them before you sigh a contract with the home warranty company. I would have NEVER signed with AHS if I had know how bad their contractors sucked. . Do your homework.
Ive had a home warranty with First American for years. They've replaced my hot water heater and brought it up to code, my garage door, my dishwasher and my furnace. Last week I had my front loading washing machine break and they came out in under 12 hours to fix it. Cost me 55. I had a glass top stove that my daughter broke. I paid 300 for a new top and only found out AFTER i paid for a new one, that this item would have been covered too.
I'm a huge fan. Any time you have issues, they get them squared away.
Just my two cents.
I called American Home Shield to fix my heat pump. The first contractor they sent out shorted out the whole system. Walked off the job. Second guy said it was fixed, but the short caused by the first guy fryed the system again. Third guy said that my two AC units were connected together. Not true! AHS refused to fix my heat pump based on this..and because the guy said there was an extra relay in the thermostat. American Standard said this is common in systems like mine. Finally had my normal repair guy come out..he found the short..gross wiring incompetence by the first AHS dude, found the problem easily and fixed it. Cost me over $500!!. I contacted the Attorney General in my state and they replied AHS was under investigation,. I just received a class action notice allowing me to resubmit my claim..which I did..Some people seem to have luck with AHS. Guess they don't care if they got junlk repair. I cancelled my policy after my problem. Good riddance. And yes, as somebody posted, AHS contractors are the bottom of the barrel, in my opinion.