Home Warranties, Are They Worth It?

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April 25, 2011

You just bought a home, pockets a little light, something breaks.  Thank goodness the house came with a home warranty, right?  I would say yes and no.  I want you to have all the facts and insider details about how these contracts work.  This is information to consider before you purchase or renew a home warranty contract.

A Few Facts:

Some companies exclude appliance or equipment by age.  So if you purchase a 25 year old house and the water heater, HVAC equipment or other appliances are original, make sure the warranty company doesn’t have an age limit on that equipment.  Also, some warranty companies have an ala carte menu approach to what they cover.  So be sure you are aware of what is and isn’t covered.  Many times people buy these contracts only to realize later it only covered a few things, not the total house.  Know what you are buying, read the agreement.

The Reality Is:

Realize that you are not a priority customer.  The Home Warranty Company does NOT pay the retail rate for a service company to come out to your home.  They have a limit of what they will pay.  They look for low cost contractors who are usually new to the business or very small with low overhead.   Home Warranty Companies generally only require that the contractor contact the homeowner within 48 hours of receiving your claim.  Don’t expect Johnny on the spot service.

Some Home Warranty Companies do not pay parts mark-up on parts over a certain amount.  They are so large they buy parts factory direct only and ship them to the installing contractor with no middleman, distributor, parts supply house or parts mark up thus saving them money.  So why should you care?  Well, if it’s your dishwasher or oven you may not care if it’s down a few days waiting for parts to be mailed to the contractor’s office so the Home Warranty Company can save a few bucks.  But if it is your air conditioner on a 100 degree day and you are being told you have to wait three days to get the parts so they can save fifty bucks, it’s a big deal, right!  Or, three more days of cold showers.  I‘ve heard heartless stories of leaving families with no heat in sub zero weather for a week and a perfectly good part being available less than three miles away.

A Few Good Men

Not all companies are like that.  Some will allow the technician to use parts off their truck and pay the mark up for it.  Or if the technician does not have the part on their truck they will pay an acquisition fee for the tech to go and get the part.  Remember you are dealing with a small contractor, who most likely doesn’t have a lot of employees or parts runners and is being asked to work on your home for a discount in exchange for a promise of volume of calls.  Some Home Warranty Companies have a reputation of being slow to pay the contractors for work done on your home.

Time Zones

Reminder: The Home Warranty Claims Approval Office that your repairman must call before he begins any actual work is open Monday through Friday 9am to 4pm depending on what time zone they are in.  That office is closed evenings, weekends, and holidays for approval of any type of repairs.  Some are open to take claims but none are open to approve work.  Which means no contractor will come out after hours, because they are unable to get approval to do the actual repair work.

They Don’t Make $ By Paying Claims

The first thing the Home Warranty Claims Approval Office is going to ask the technician when they get him on the phone is a series of questions designed for them not to have to pay your claim.  Such as; Does this appliance or unit show any signs of neglect, damage or lack of maintenance?  What caused the part to fail?  Is the system installed up to code?  Every cell phone is a camera.  So if your 12 year old hit the thermostat with the football, (that happened at our house), they may ask to see a picture or for the old part back.  Or if your wife hits the condenser with the riding lawn mower.  I was in a hurry.   Dog chews through the wires.  I could go on.  The Home Warranty will not pay for those types of claims.  They may also ask for the maintenance records to be faxed to them proving you have properly maintained your HVAC equipment.  Do your tune-ups every six months, once for the a/c and once for the heat.  I have been asked many a time to document maintenance on home warranty claims.

A Way Out

Another thing you need to be aware of is if you do have a major repair such as compressor failure or heat exchanger cracks the Home Warranty Company may offer to buy you out of your contract.  You may wish to consider this if you want to replace the component rather that do a major repair on an older unit.

I have had home warranties on houses I have bought and sold, I have serviced them, I have fought with them on customer’s behalf and I have friends and relatives who have home warranty contracts and swear by them.  I have seen the good the bad and the ugly.  Just be sure to go into them with eyes wide open.

Pictures courtsey of Google Images.

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