Is a Home Warranty Worth the Money?
If you recently purchased a home, you may have been offered a free home warranty program for a certain length of time. It’s definitely worth taking advantage of the service while it’s being offered for free, but when it comes time to renew, is a home warranty worth the money?
A home warranty is basically a service contract. You will pay a certain fee for the program which will range in price depending on plan you choose. A basic plan will typically run a home owner $350-$500 annually. Basic plans will cover certain repairs on plumbing fixtures, kitchen appliances and exhaust fans, but not all repairs are covered so it is important to read your policy. If you want premium coverage, then you’re looking at an additional $100-$300 a year which will cover pools, air conditioning units, washer/dryer, water softeners, etc. The premium plan will cover more than a basic plan, but not everything will be covered on this plan either.
In addition to the annual/monthly fees that a homeowner will pay, a service fee/deductible ranging from $50-$200 will be due to the service provider (plumber, electrician, mechanical tech) when they provide the service. This fee is due every time you call in a claim, regardless if the claim is covered or not. This is about the same fee you would pay a service provider that you call to your house who is not sent by the warranty company.
Things to know about a Home Warranty:
- You usually have an annual aggregate for claims so find out what that is when deciding which warranty company to choose.
- If you are unsatisfied with a service provider the Home Warranty Company sent to you, you can usually ask to take a “cash out.” Which means they will pay you the cash value for that claim and you can take that money to hire a company of your choosing.
- When you call in a claim, make sure you ask them if you have coverage. A lot of times, people fill out a claim request online and cannot select the item (probably because there is no coverage for that item). For example, an outside leak is usually never covered- but you put “pipe leak” when you’re filling out the online claim. You will be charged a service fee for the technician to tell you that you do not have coverage outside the home. Check coverage if you are not sure.
Tips for those with a Home Warranty:
- Check the reviews of the service provider they are sending you. Keep in mind that the warranty company is in this to make money which means they will send the contractor who is the least expensive. You can argue that you would like someone in their network who has better ratings but you are not guaranteed to get another company sent to you.
- Read your policy! I cannot stress this enough. Home owners tend to be upset when things aren’t covered. Our Las Vegas plumbers run into this issue all the time with warranty calls. Knowledge is power so make sure you are educated on your policy and what they will cover.
- A service can quite possibly be resolved for less than your deductible if you call a contractor outside of the warranty. For example, to run a snake to clear a clogged toilet, it would cost $90-$150 usually. If your deductible is $100, you may be better off hiring a plumbing company who would only charge you $90. At least then you can pick your own provider, and chances are they will be there before the 48 hour window the warranty company allows.
Example of the claim process: You have a leaking faucet in the bathroom, so you call the warranty company to make a claim for a faucet repair. They will send the claim information to a plumbing company that is in their network (you normally will not be able to choose who they will send the claim to). That plumbing company typically has a 4 hour window to call you and schedule an appointment that will be within 48 hours (not including weekends or holidays). The plumber will hopefully arrive on the scheduled day and time to look at the leaking faucet. You pay them your $65 deductible and they will determine the faucet is leaking from the body and needs to be replaced. IF you have faucet coverage, they will schedule a time to return with a new faucet, but if you do not have faucet coverage then you wasted $65 for them to tell you what you probably already knew- that the faucet needs to be replaced. The plumber will probably give you a retail bid if it’s not covered for them to replace it, and if it is covered- the basic policy will only allow them to replace it with a builder standard faucet. In other words, if you have a high-end Kohler faucet, they will replace it with a lower quality. However, premium coverage will cover more but it still may only be a portion depending on the cost of the repair.
So, do your research before deciding if the warranty is worth it to you. Look at the policies offered by the many different warranty companies and make an educated decision. If you have an older home, you may benefit from a warranty policy. A newer home that may not have many maintenance issues may not be worth the $500 a year that you will spend plus the service fees. Also, for peace of mind, you may want to opt out of the warranty so you can choose the vendor you have working in your home.