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.
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"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.
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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.
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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.
I bought one with my used home...the electric utility showed up 2 months later and said the contacts at the meter were no good and needed replaced. Warranty said it covered electrical, so I gave them a call...they declined to honor the warranty because the meter was mounted on a utility pole and not a "integral part of the home".
Wasted $500 for a useless warranty and spent another $500 for a electrician to replace the contacts.
My take on this sort of stuff is its like a 3rd party extended warranty on your car...it sounds good when you buy it...but trying to get something fixed you have a better chance of catching greased lightning.
STOP USING THAT MEAN AND DECEPTIVE TERM.
-- INSURANCE POLICY--
is all it is..EVER...don't let them tell you otherwise.
Now you can clearly know what you're buying...THEN decide if it's for you.
Do the math.
Many times your own savings account is more than enough.
Just calculate this ;
insurance policy ---For all the money you give THEM ..if you never use it..you never get it back . period.
Savings account -- if you never use it...it's still your money.
insurance policy -- you could be using more money than you paid in.
Savings account-- you could need more money than you have saved.
You do the math..
You decide ...for .YOU
I have two homes and Im religious about the home warranty. I renew it every year and consider it a good value. I cant repair anything. Im going to need to call someone anytime anything needs a repair. For $600 per year, I have had all types of plumbing, electrical, appliances and HVAC work done. Its true, that one visit of a covered repair can pay for the entire years premium. Each season, my heat pump (both AC and Heat), goes out or needs a major repair. The repairs always come at the worst time. Between Thanksgiving and Christmas, the heat goes out. In june and July, the AC will need a major repair. Under these circumstances, a cold call to a technician means they can charge anything they want; even if I balked, they would leave my house and go to another home. They are going to make their money, and dont care if im misearable in my hot or cold house.
Having the warranty takes away the financial incentive to do more work than needed. The warranty company polices the problem and the proposed repair. They follow up until the repair is completed. I got major systems and appliances replaced when they couldnt be repaired. Its a great deal if you want to be pro-active.
Watch out for the exclusions though. The technicians will try to pounce on opportunities to charge the homeowner, even when other parts of the repair is covered. On a hot water heater replacement, the technician wanted to charge me $300 to move a sink for more work space, and to dispose of the old unit. I did that much myself, and saved myself the $300. On replacement of my heat pump, the company tried to charge me $500 for new ductwork. I got that done by a handyman for $200.
If you want to save money, surprises, and hassle, get the warranty.
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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.