What is a home warranty?

A home warranty is a service contract that helps cover the cost of repairs or replacements for major home systems and appliances. Unlike homeowners insurance which typically covers damage from events like fire, theft, or natural disasters, a home warranty is focused on the maintenance and repair of items that might break down due to normal wear and tear. If you have an older home or a home with older systems, a home warranty will help offset the costs of repairs or replacements.

Here’s a basic rundown of how it works:

1. Coverage: Home warranties often include coverage for systems like heating, cooling, plumbing, and electrical, as well as appliances such as refrigerators, ovens, and dishwashers. The specifics will vary depending on the plan you choose. The home warranty plan my husband and I recently purchased for our home will even cover a roof leak up to $1000, certainly helpful but is not going to replace a whole roof. I have found home warranty plans most helpful over the years with HVAC system and hot water heater replacements.

2. Cost: You usually pay an annual premium for the warranty, plus a service call fee (or trade service fee) each time you request a repair. Our plan with First American Home Warranty has an $85 service fee that you pay at the time your request the repair. We have the plan with the most coverage including code upgrades and coverage for our guest cottage which comes to about $1000 a year.

3. Service: Here are how service the service works - when something covered by the warranty breaks down, you contact the warranty company, which then arranges for a technician to come and fix the problem. If the repair isn’t possible, they might replace the item, depending on the terms of the warranty.

What are the limitations of Home Warranties?

Home warranties can be a great way to protect yourself against unexpected repair costs, but they often come with their own set of frustrations. You need to have proper expectations that this will help offset maintenance and repair costs but will not keep you from having any costs. Some common issues people have with home warranties include:

• Limited Coverage: Many home warranties have specific exclusions and limitations. For instance, they might not cover pre-existing conditions, certain types of damage, or high-end appliances.

• Claims Denials: Some homeowners find that their claims are denied due to technicalities or the warranty company's interpretation of coverage limits. This can be particularly frustrating if the issue seems clearly covered.

• Service Call Fees: Even with a warranty, homeowners often have to pay a service call fee each time they request repairs, which can add up and sometimes negate the savings from the warranty.

• Low-Quality Repairs: The contractors or repair technicians sent by the warranty company may not always meet high standards, leading to subpar repairs or replacements.

• Slow Response Times: There can be delays in scheduling repairs or in getting issues resolved, which can be inconvenient, especially if you're dealing with urgent problems.

• Lack of Transparency: Some homeowners feel that the terms and conditions of home warranties are not clearly communicated, leading to confusion about what is and isn’t covered.

• High Deductibles and Costs: Sometimes, the costs of the warranty and its deductibles can end up being more than paying for repairs out of pocket.

• Poor Customer Service: Experiencing difficulties getting in touch with customer service or getting unsatisfactory resolutions can be a major source of frustration.

• Limited Network of Contractors: The warranty company might use a restricted network of service providers, which can limit your options and potentially lead to longer wait times or less quality service.

• Complex Terms: The contracts can be complicated and filled with jargon, making it hard for homeowners to fully understand their coverage.

We have just made our first claim for a plumbing valve leak (we have the plumbing upgrade). I logged in to our account at 11pm, reviewed our coverage for plumbing, and then filled out a short form with what we need repaired. I paid the $85 service fee and it only took me about 5 minutes. We loved that the whole process could be done online outside of business hours - very simple, quick and convenient. However, we did not hear back from a provider within 24 hours. It took 4 days and when the provider came, they were AWFUL! Like, my husband asked them to leave awful. I called the warranty company and they were great. They assigned me a new provider who was really nice and helpful. Fortunately, our leak was small and we could shut off the water to that area and still have water for our home. But, if this had been a leak affecting our whole system, the more than week it took to get a decent repair person would have been a problem. The service providers offered seem to be the biggest complaints you find with home warranties.

While home warranties can offer peace of mind, it's crucial to carefully read and understand the terms of the warranty before purchasing and to research the warranty company’s reputation for service and reliability. There are some really bad home warranty companies out there.

We have clients that have had success with First American Home Warranty and Select Home Warranty.

Last but not least, you also have options of who orders the warranty if you are currently buying a home. Click HERE to read about your options. Do you have any experience (good or bad) with home warranties? Please share below!