Do you feel like you've ever been swindled? Been duped into spending your hard-earning dollars on snake oil? That's how I feel about my home warranty. And apparently I'm not the only one.
What exactly is a home warranty? I wasn't completely sure when I accepted the one year plan that was included with the purchase of my house.
A home warranty is a service contract that promises to repair or replace certain appliances and systems, as long as it meets the terms and conditions of the agreement.
The L.A. Times recently published the revealing story, Are home warranties worth the cost?
According to Consumers' Checkbook, homeowners would be better off diverting the funds (typically $400-600 per year in premiums) into a home repair fund. They argue that “buying a home warranty is like buying a (very) limited extended service contract on a bunch of appliances.”
Additionally, many of the most expensive repairs may not be covered. Examples include roofs, leaking windows, basement moisture, chimneys, structural components, ice makers, and plumbing backups caused by tree roots. Ouch.
On top of sketchy coverage, service call fees range from $75-100 and you have no control over the repair person who is sent to fix the problem. Hmmmm.
Another recent article, Angie’s List: Are Home Warranties Worth It?, from CBS Pittsburgh tapped the popular review website for advice on how to navigate the tricky landscape of home warranties.
The company reveals that “for ten years in a row, home warranty companies have been the worst-graded category on Angie’s List.” But the dissatisfaction typically occurs when homeowners have failed to educate themselves about what is and isn't covered under their plan.
What's the deal with my home warranty?
1st year – paid for by previous homeowner
2nd year – $46.08/month
3rd year – $46.08/month
4th year – $52.00/month
Plus, $75 per service call.
I recently received a renewal notice stating that the premium is increasing to $55.00/month at the end of June.
My coverage contract pamphlet includes plumbing, plumbing stoppages, water heater, electrical, kitchen appliances, central vacuum system, attic and exhaust fans, ceiling fans, central air conditioning (ducted), ductwork, heating, kitchen refrigerator, and smoke detectors.
Examples of items not covered within these categories: stoppages caused by roots, holding or storage tanks for water heater, solar equipment, door bells, intercoms, alarms, insulation, ductwork where asbestos is present, fireplaces, chimneys, ice crushers and beverage dispensers from the refrigerator. Pre-existing conditions are not covered.
Note: Every company offers a unique plan.
Is It Worth It For Me?
I was lucky to move into a newly renovated home with several brand new appliances. I've paid a total of $1,729.92 over the past three years in premiums and have never made a claim. Would I have been better off if I placed that money into an emergency fund? Maybe.
Last year when I was attempting to shave down my monthly expenses, I called my home warranty provider and attempted to cancel my policy. I was connected with a customer service representative who convinced me to keep my plan by sharing a story about a former customer who cancelled her plan and then had to pay thousands of dollars in repairs when her hot water heater died shortly thereafter. Sigh.
I have until the end of the week until my plan automatically renews and I'm heavily leaning towards cancelling the policy. $55 per month just doesn't feel worth it to me.
Is this the right move for everyone? Absolutely not. I would highly recommend for another homeowner to thoroughly review their policy (especially the fine print), learn what is covered, what isn't covered, and consider the condition of these items in their home. It's also important to intimately understand what your homeowners insurance covers.
Readers: Do you have a home warranty? Has it been worth it?