Selecting a Home Warranty
Posted on May 23, 2007
When I bought my house about four years ago the realtor included a home warranty with the house. So for the first year I had a home warranty through Old Republic. I live in an older home (built in the 50’s) so I figured the warranty would be of some use. I was right and needed to call in a couple of electrical issues. The warranty cost around $250 or so to renew, and after much consideration decided not to renew. I wanted to use this post as a reference for selecting a warranty as well as discuss the pros and cons of a home warranty.
For those unfamiliar with a home warranty, it is essentially an insurance policy that will replace or repair appliances and systems (plumbing, electrical, etc). Be very careful to read exactly what the warranty covers if you are considering purchasing as the coverages offered vary quite a bit among the different companies.
Here is the thought process I used to not renew, however I do feel for some people a home warranty may be of value.
Pros:
- As with all insurance policies the major advantage is transferring risk to another party. You have the piece of mind that if anything goes wrong (as long as its covered within the policy) that it will be fixed or replaced. This can be beneficial if you are very tight on funds and need this piece of mind to sleep at night.
- Adds some value when selling the house as most are transferable.
- You do not have to call around for estimates and quotes when something breaks. This can be hassle calling each plumber in the phone book and trying to schedule an appointment. The warranty takes care of this and you only pay the deductible regardless of cost of repair.
- Some companies can be included as a monthly payment in conjunction with mortgage so you do not have to pay the entire cost upfront. Be sure to do the math and see if this works out in your favor.
- If you are not a handyman, this gives you an easy way to get things fixed without having to hit up your local Home Depot or Lowes.
Cons:
- The main reason I did not renew mine was the deductibles I would pay with each trouble call. So even if the technician was there for five minutes and it was a simple fix, that would cost $75 under my policy.
- The other reason I did not renew mine was the cost of the base warranty’s annual fee. I felt like for $250 with new electrical and plumbing there was a low chance of that needing to be fixed anymore. The base contract did not cover enough to be of actual use, and each add on (ie washer/dryer) was another $75-$100.
- Not replacing items, but repairing them each time was another reason I did not renew. Each time you call in a trouble ticket a deductible must be paid. Sometimes with older appliances it’s cheaper to just replace the item and be done with it.
- Companies use fine print to deny paying. Only calling in two trouble tickets I did not have this happen, but have heard the horror stories. They would use the most obscure clause to get out of paying (ie home owner did not maintain equipment).
In my opinion, after owning a home warranty I think most people are better off just saving the money that would be spent on the warranty and putting it in an emergency fund. This allows the home owner to be protected and as well as gives them the control to do as they see fit for a home repair.
- Check out HomeWarrantyReviews.com for more detailed info on specific policies and costs.
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3 Responses to “Selecting a Home Warranty”
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Interesting look from a consumer’s view of the home warranty.
Our office uses AHS but we do see Old Republic on occasion. The denying payment part was eye opening. Did you contact your Realtor? I know when a consumer is unhappy with the service received by their warranty company, they will often contact us and then we can question our warranty rep in detail about the specifics.
Greg:
Thanks for the response. I did not actually have a denying payment problem, but I was referring to some comments I had seen from others on the web. I have heard others stating the warranty would short change them on repairs. I am sure those are the horror stories and not necessarily the norm as I stated above. The main reason I did not renew my home warranty was the cost of the deductible with each repair. I just decided I could repair the majority of the problems myself and save a significant amount. Luckily, so far I have been right as I have not had any major problems. However, I could see a benefit to the home warranty for those that do not want to do the repairs or have not saved in the event of an expensive problem.