Are home warranties worth it?

By Jodi Mohrmann - Managing Editor of special projects
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JACKSONVILLE, Fla. - For the past decade, home warranty companies have been at the top of the list when it comes to the highest percentage of complaints from Angie's List members. Consumer turn to them for help when an appliance or HVAC system or something else around the house goes kaput, but all too often they find their warranty is kaput as well.

Angie's List found the most commonly reported issues include:

  • Misunderstandings of what is covered
  • No-show or uncommunicative repair technicians
  • No control over who does repairs
  • No control over replacement models
  • Payment, reimbursement and cancellation issues

A home warranty is often included with the purchase of a home, but many homeowners don't fully examine the documents because it's just another packet of papers amid dozens of others at closing. So they file them away only to be unpleasantly surprised when they need home repair help. This often leads to coverage confusion because the person using the service isn't the one who bought it. Even when people buy the coverage themselves, they don't always read the terms carefully.

What's really covered?

  • There's often confusion between home insurance and a home warranty. Insurance covers theft or destruction, whereas warranties cover basic systems in your home against failure.
  • Just like a car warranty, a home warranty offers protection for a fixed period of time, but only if certain conditions are met. The system in question needs to fall under the policy umbrella.
  • Any system covered needs to be maintained properly. This means, for example, that if you don't have your furnace cleaned every few years, your provider may deny you coverage in the event of a failure.
  • It's also important to understand that many home warranties don't cover major structural damage such as a crack in your basement wall or a leaky roof.

What does it cost?

  • Expect to pay between $250 and $450 per year for a home warranty. At the end of each year, you'll be given the option to renew or end your coverage.
  • Services provided under the warranty still come with a small cost. The fee per incident ranges from $50 to $75 and will be paid to either the warranty company directly or the contractor who comes to your home.

What to keep in mind when considering a home warranty:

  • Check with your state's department of insurance to verify if the home warranty company you're considering is properly licensed to do business. If licensing isn't required in your state, inquire about the company's status with your local consumer protection agency. 
  • Most warranty providers have agreements with local contractors, but you can't pick and choose who you want to do the work if your warranty is footing the bill.
  • Most home warranty companies offer a variety of plans, each providing different levels of coverage, so be sure to read the details of any contract before buying. 
  • Find the owners' manuals for your furnace, air conditioner, refrigerator and other major appliances to determine age, condition and maintenance they should have needed.
  • How old are your appliances? Know the average lifespan to determine whether a home warranty is a good deal. You many find new appliances may already have a manufacturer's warranty.

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