The Good, The Bad and the Ugly of Home Warranties

Behold the Home Warranty!  Like Superman, it comes rushing in when the hot water blows up or the Air Conditioner is no longer air conditioning.  And although small in cost, it delivers big in savings. 

Well...maybe.

The home warranty business was unknown to me prior to entering Real Estate way back in 2007.  But it didn't take me very long to learn how it works.  For between $400-$500 you can obtain one of these dandy policies for a whole year.

The basics of a home warranty are pretty simple.  A home warranty covers things that your home owners' insurance policy typically doesn't cover.  Got a roof problem?  Call your insurance agent.  Furnace not working?  Call the Home Warranty people.

Basic home warranty coverage usually includes the following:

Some home warranty companies offer expanded coverage which includes items such as:

Looks pretty good right?  For the most part, it is.  I have heard stories from clients who had a great experience with their home warranty company.  And I've heard nightmare stories too.  One particular problem seems to be that many of these companies have call centers.  And while the people who answer the phone are friendly enough, getting the action they call for to actually be implemented can be frustrating.

For example, my dad recently bought a house.  We got him a home warranty, which was good because he needed service a month or so after closing when the air conditioner quit working.  He called the home warranty company and they sent a technician out later that day.  The problem was a blown compressor.  It would have to be replaced.  Dad paid the small service fee, the technician said he would order the part and all would be taken care of.  Two weeks later, the part finally arrived and was installed and the AC worked again.  The service tech said it was the home warranty company's fault that it took so long to get the part.

Another issue is the fine print.  Always read the fine print!  Your momma taught you that, right?  Did you listen to her?  With most home warranty companies you can upgrade your plan to cover "non-covered expenses."  If you read the fine print, you learn that non-covered expenses are things you're gonna have to have when things go badly. 

Let me give you an example.  My nephew bought a house a while back.  His AC unit recently quit working, so he called the home warranty company.  Just like my dad, they sent out a technician, who diagnosed the problem.  Where my dad's unit needed only a compressor replacement, my nephew's AC was DOA.  The whole unit would have to be replaced.  Guess what wasn't covered?  A permit that would be required.  Freon.  Removal and hauling off of the old unit and somewhere in the neighborhood of $825.00 worth of other non-covered, but necessary expenses.

Needless to say, my nephew was none too happy and I couldn't blame him.  Of course, he ended up getting a very nice, brand new AC unit that cost thousands of dollars more than he paid.  But still, the unexpected expense was not a happy surprise.

So when it comes to home warranties, remember this.  The good about them is that they actually do cover big ticket items that break down or need repair in your home.  The bad about home warranties is that it can take a long time to get your problem resolved, a lot of phone calls and plenty of stress.  The ugly about home warranties is that even though they aren't perfect, I still think you're better off having one than not having one.

Remember, if it's worth owning, it's worth insuring. 

To find reviews of home warranty companies, just do a Google search for the term "home warranty company reviews."

Superman photo courtesy of Flickr Creative commons:  http://www.flickr.com/photos/xurble/376591423/
Mother photo courtesy of Flickr Creative commons:  http://www.flickr.com/photos/theresasthompson/2209802323/