Many homeowners are looking to home warranties for peace of mind, but to avoid unpleasant surprises, it’s important to understand the limits of what you’ve purchased.
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For example, a consumer alert from the office of Washington, D.C., attorney general Karl A. Racine urges consumers to read home warranty contracts carefully. The warning encourages consumers to know what the contract does and doesn’t cover, be wary of exaggerated claims, and seek more information about the company, preferably from someone who has worked with it before.
Over the years, state officials have also filed complaints against some warranty companies. For example, in 2014, the New Jersey Division of Consumer Affairs filed a complaint against a leading national home warranty company for denying claims through deceptive means.
The company was accused of blaming malfunctions on improper maintenance “even when technicians declared that the covered home systems or appliances had been properly maintained, and/or had failed for reasons not related to poor maintenance or preexisting problems.” According to the complaint, one customer was told that her air conditioner claim would be denied unless she could provide 12 years of maintenance records.
Consumer reviews, the website for the attorney general in your state, and sites like the Better Business Bureau can all be valuable resources for researching a home warranty company’s history and distinguishing those with positive customer reputations and track records. The Better Business Bureau alone lists 85 home warranty companies with “A” or above ratings, which could be an excellent place to start your search.
Find out when exactly your coverage begins
Jessica Hoff, broker-owner of Century 21 JRS Realty in Clark, New Jersey, has seen mixed results for her clients with home warranties.
“On the one hand, there was a client that had a problem with a broken toilet on a Friday,” she says. “They called the home warranty company over the weekend, and someone was there Monday. It was a $150 deductible, and they wound up getting this whole thing done. That was a really positive experience.”
Meanwhile, another client had the central air conditioning die three days after closing, but the company refused to cover any claims for the first 30 days. “It’s 100 degrees in New Jersey,” recalls Hoff. “It’s the middle of summer, and he has to wait 30 days for the central air to be covered.”
It’s pretty common for home warranty companies to start coverage 30 days after the purchase of the contract. Though this will be spelled out in the agreement, it’s a detail that can easily be overlooked. Waiting 30 days for a new dishwasher may be inconvenient — but waiting that long for a working HVAC system could be more problematic.
Read the fine print
Big-ticket items can have low coverage limits in some home warranty plans, leaving consumers to cover the rest of the bill. Kevin Brasler, the executive editor of nonprofit consumer review organization Consumers’ Checkbook, points to furnaces as an example of an expensive unit to repair or replace, with many home warranty plans covering only a fraction of anticipated costs. “That’s not total protection,” he says, “and that’s not peace of mind as far as I’m concerned.”
Several sample contracts from leading home warranty companies list a limit of $1,000-$2,000 for work related to heating and air conditioning, when a new furnace or boiler may cost thousands of dollars more. So while consumers may save money with a home warranty, you should still expect to pay out of pocket when something significant needs to be replaced.
In addition, Chartrand recommends that homeowners inquire specifically about any smart appliances they own to understand the details of what coverage could be available to them. While home warranty companies try to keep up with the pace of technology, he says, there can still be a lag in coverage options for homeowners with newer smart appliances.
How to get a better experience from your home warranty
“Before you have something break, take a look at your home warranty contract and become familiar with it,” advises Chartrand. Consumers may be leaving money on the table simply because they forget or aren’t aware of items that could be covered under their policy. His advice for those wanting to get the most out of their home warranty is to always check it before paying to replace something yourself.
“For example, a lot of people have coverage in these contracts for light fixtures and faucets,” he said. “Frankly, I forgot one time. I had a faucet break and I went out to buy one and went ‘wait a minute, my home warranty covers that!'”
Alternatives to home warranties
Suppose you’d rather avoid navigating the specifics of a home warranty policy. In that case, you could take the cash you would put toward purchasing a home warranty and stash it in an emergency fund instead.
For example, let’s say you bought a home warranty plan that costs $50 a month and a $150 charge for every service call. If your dishwasher needed to be repaired after the second month, you would already be paying at least $250 before it was fixed.
If the repair had cost $250 or less, that money might have been better off in a savings account that you could have pulled from while choosing your own preferred servicing company. However, suppose the dishwasher needed to be replaced. In that case, it could easily cost over $600 for a 24-inch unit — potentially making the home warranty worth it (depending on when it broke and if the replacement was covered in your plan).
Another option is to explore adding “endorsements” to your homeowners insurance. These can expand your coverage to pay for electrical or mechanical damage to appliances, systems and utility lines, though they likely won’t cover damage from normal wear and tear.