Do You Need a Home Warranty?

You may have heard of home warranties, but what are they exactly, and are they a good fit for you? AHRN.com has done the research for you, laying out the basic pros and cons to help.

A home warranty is a service contract between you, the homeowner, and a company that will arrange discounted repairs with local vendors as well as replacement services. Typically, it covers specific components within the home: electrical system, plumbing, the furnace. You can also buy warranties that cover your major appliances – and some offer additional coverage for items like your septic system.

If your home is brand new, warranties are provided by the builder covering the main structure for 10 years,  plumbing and electrical for a shorter term, and letting the appliances’ warranties for about a year stand.  For an existing home, purchasing a home warranty often has the most value.

TIP: A home warranty differs greatly from homeowners insurance, which covers the major things that can damage your entire home and the possessions within it, like fire, flooding or extreme water damage.

HOW IT WORKS

The home warranty company has outsourced contracts with proven service providers in the area. If something breaks down, you call your warranty company, explain the problem and they do the rest. A specialist from their roster comes out to assess the problem. If they can fix it, they do it right then. If they have to run out for parts, they come back again to install them – and even if it’s on a different day, the amount of visits it takes and any parts are all included in the one-time flat service fee!

For example, I rented a condo from owners who went to Europe for a year. Since they couldn’t handle issues from afar, they got a home warranty. They gave me their contract number and told me to call them if I had any problems. Sure enough, there was an issue with their refrigerator door sealing shut. I called their company and a repairman was out the next morning. He determined that it needed a new door. He ordered it and called me to make an appointment when it came in a week later. He returned, put an the entirely new door on the fridge, and took the old one with him – all  covered by the one-time service fee of $75! I was impressed.

So when I rented my house out and lived in another state, I too got a home warranty with American Home Shield (AHS). I spent $45 a month in premiums, and gave my tenants the card with my account number and the phone number to call. Whenever there was a problem – a leak under the sink, a burner not working on the stove– they called AHS. It also cost only $75 for it to be fixed, and I didn’t have to search for licensed repair people from afar, visit the house or deal with pricing out parts. And when the drier broke down, rather than get a new one, they ordered $400 worth of parts and completely rebuilt it – yet it cost me nothing above that $75! That included 3 visits to the house, and the research, ordering, receiving and delivering the parts. A home warranty seemed completely worth it in all these cases.

So let’s break it down:

COSTS

You pay a monthly premium totaling $3-500 a year for a basic policy, calculated on the kind of home you have (condo, townhouse, etc). It increases if you extend your plan to cover something like the AC or a pool. Service fees are charged each time you call, at an average flat rate of $60-75 per case, which should cover repeat visits if needed (be sure to check the contract language).

UPSIDES

• It fills in what your home insurance doesn’t cover.
• It helps protect you from costly problems when major systems or the appliances you rely on daily in your house break down with normal use, usually at a substantial savings.
• Some policies can be upgraded to cover conditions that existed before you got your policy!
• The ease of knowing you’re covered.
• If you’re putting your home on the market with older appliances, a home warranty gives you peace of mind that you’re covered if anything should go on the fritz while trying to sell, and it can be transferred to the buyer to cover them.
• Usually pays for itself, as home systems or appliances usually have issues once or twice a year.

DOWNSIDES

• You can’t hire anyone you want to fix something, but must use their service providers.
• The effort will be made to repair rather than replace something, and depending on the age of it, that might be considered a downside.
• You can’t use the policy to replace something just because it’s old.
• If they do replace things due to being irreparable, there may be a cap on how much they’ll put toward it.
• Repairs are based on things that are maintained properly, so if yours have not been, that can become a factor in coverage (if damaged by acts of God, that goes under your hazard insurance).

Who do you use? There are many companies out there, with American Home Shield among the most well known. You can Google for comparative charts, like this helpful one we found on consumersadvocate.com. Also, it’s a good thing to read reviews of a company. If there are enough reviews, you’ll feel pretty confident in choosing one or two to explore further to find what fits your needs.

Having both a home warranty and house insurance are probably the best way to fully protect your home — and mind your finances. Just be sure to read through all the terms and conditions carefully to understand what exactly is covered, what is not, and what the costs are.

We want to know:

Have you bought or used a home warranty?

Meet your Contributor:

Rochelle Joseph is a Writer and Image and Marketing Consultant who has had experience marketing, renting, buying and selling her properties for over 20 years. She has written and edited for several publications, including the Boston Book Review, The Emerson Review, ZooBorns.com, WildLife Magazine, the Houston Zoo, The Wildlife Center of Texas, One Spirit Interfaith Seminary as well as AHRN.com. She currently writes at her great gifts blog at https://lookyhereu.blogspot.com and her animal blog at https://naturegirrrl.blogspot.com