Whenever I help a buyer purchase a home I suggest they buy a home warranty. Home warranties have been around for many years. The idea is to help homeowners limit the out-of-pocket expenses for unexpected home repairs by charging a nominal amount for the policy of around $700. There is a service fee of around $80 for each repair request. The amount the home warranty will pay to repair an item may be limited. For example, if the HVAC system needs replaced they may cap the payment at around $2,000. They will not pay for repairs needed because of lack of maintenance, intentional damage or a pre-existing condition that was in place prior to the policy being purchased. The most common complaints about home warranty companies are 1) Claim is denied citing homeowner’s maintenance or negligence, 2) Claim is denied because of a “pre-existing problem”, 3) Repairing an appliance even when it is in such bad shape or so old it would make more sense to replace. This is especially true with HVAC units. 4) The parts are replaced with builder standard which will be the cheapest available. If the homeowner had an upgraded kitchen faucet, then they will have to pay for a similar upgraded replacement. 5) It takes too long to get an item repaired. 6) Lastly the home warranty company is only as good as the companies they hire to make the repairs. Sometimes repair companies sign up with home warranties because they cannot get business on their own.
There are dozens of home warranty companies. So how do you know which one is the best? One way is to look at reviews from other customers. There are consumer advocate groups that research the different companies. However, they may receive compensation from the companies so may not be providing an objective and unbiased opinion.
I recently had poor experiences with two home warranty companies who will go unnamed. I will refer to them as company A and B. If you want to know who they are send me an email. Company A sent a technician to look at a 1962 air conditioner. The tech said it needed the coils cleaned which is not covered on the policy. This company wanted two times as much as Badger, the air conditioning company we use for non-home warranty calls. When we said no on the coil cleaning the home warranty said they would not cover anything. We sent Badger and they said the unit needed to be replaced. Cleaning the coils would not solve the problem. We had a similar experience on another rental. The technician said the issue was the thermostat was set on gas heat and that is why it was not cooling. This was interesting as the house is all electric.
I received recommendations from several people for a different home warranty company. I did not think I could find a home warranty company with worse service than Company A, but I was wrong. I won’t bore you with all the details but here are the highlights. Company B sent a plumber to look at a 1979 toilet. The first plumber said is needed to be replaced. B said they needed a second opinion. After 3 weeks it was finally replaced. The same thing happened with a pool filter. The pool company said it was lack of maintenance. The homeowner had to provide proof that the filter was serviced regularly to get the home warranty company to grudgingly agree to the repair. A 20-year-old refrigerator went out in one of our rentals. Luckily it was vacant, so it was not a rush to get it repaired. The first tech said it needed replaced. Again, the home warranty wanted a second opinion. Eighteen phone calls and several emails later the home warranty cashed us out and we bought a replacement fridge. One of my buyers opened a service call because the air conditioner was making a horrible noise. The home warranty would not send a tech because the AC was still cooling. Luckily my client called an AC company that handles the service calls for Company B. The issue was the fan was coming apart. If it had not been repaired there would have been a lot more damage. Then the home warranty would probably have claimed lack of maintenance. I complained and they grudgingly agreed to cover $1200 of the $1500 repair. At this point Company B had apparently have enough of me making them honor the contract and do what they are supposed to do. They have now refused to sell home warranty policies to my buyers.
So are home warranty policies worth buying? In general I would say yes. However do your research before buying. Always buy the most expensive policy so you have the best coverage. Read the contract thoroughly so you know what is and is not covered. If you have a problem with you HVAC system, make sure to always say it is not cooling or it is not heating to ensure a technician will be sent to check for problems. The bottom-line is home warranty companies are insurance companies. They do not want to pay.