Nine Questions to ask Home Warranty Companies

A home warranty can provide valuable coverage against the cost of a wide variety of expensive home repairs, but not all home warranty companies are created equal and not all warranties cover the same repairs.

It pays to ask questions before entering into a contract, bearing in mind that selecting a home warranty is very different from the kind of manufacturer’s warranty that accompanies the purchase of a new car. Instead, a home warranty is equivalent to an “after-market” car warranty. You should understand what the warranty really costs and what it really covers by asking these questions:

1) What’s the Standard Pricing?
The cost of the warranty is an obvious consideration, but there is more to the story than the price of the first year of coverage. Warranty companies know that repairs become more likely as systems age, and often the premium cost increases in the second year and following years. It’s not uncommon for the first year premium to be a steeply discounted loss leader that convinces you to sign up. Make sure you know what happens to your premium after that first year. 

2) What is the Cost of Service Trips?
In addition to the premium itself, most warranty companies have a fixed charge for each service call. What is the price for each visit? Is it a flat fee or is there an extra cost for emergency service? Does the company offer an option to increase the flat rate for service calls in exchange for a lower annual premium?

3) How High are Coverage Limits?
Warranties always put limits on the company’s liability, whether those limits apply to the warranty as a whole or to specific items. Ask if there’s an annual limit on any and all work the company performs. Find out if there specific limits on individual items or systems.

Some contracts allow the company to pay you a fixed amount, typically no more than a few hundred dollars, in order to buy its way out of the contract. It pays to ask if this is a possibility and to find out what circumstances would allow the company to opt out of the agreement.

4) What Items are Covered by the Home Warranty?
This is perhaps the most basic question of all, but it pays to consider it carefully. Systems and components that you might assume are covered may be specifically excluded. Is the roof covered? How about the air conditioning equipment? Does coverage extend beyond the foundation, or are you responsible for gas, water and sewer lines that are on the property but outside the foundation?

5) Repair or Replace?
Home warranties almost always give the warranty company the option to repair instead of replace an item, since this is the more cost effective approach. However, it may not always the best approach from your perspective. 

For example, if your air conditioner has several different issues and they come out multiple times and patch it, instead of replacing the unit, this could cost you a service fee for each visit.  Not only that, if it’s in the middle of August and your AC goes out every week or two during the process you could spent some hot days waiting for the repairman to show up.

If they do replace an item, is it replaced with an item of the same kind and quality as the original? Does the contract say a replacement is satisfactory so long as it is functional?  In this case replacement may not be the best option if a premium item or system is going to be replaced by a lower grade.

6) What are Homeowner Responsibilities?
Home warranties almost always exclude coverage for items that are not properly maintained, but the issue for you is whether the warranty company will require proof of maintenance before it agrees to cover a repair. 

Even if a company does not have a specific requirement for maintenance records, coverage may be denied if a repair contractor believes that an item was not sufficiently maintained. This is a frequent source of conflict between home owners and home warranty companies so also ask about how maintenance disputes are resolved.

7) What’s the Repair Timeframe?
Some companies are available 24 hours a day so that a claim can be initiated, and all provide a time frame for getting a contractor to the home. In an emergency, though, does the company offer faster service? If so, how is an emergency defined? Are there special steps you must take? Although it is no guaranty of faster service, the company should be able to provide information about the contractors it uses so that a homeowner knows that help is available within a reasonable distance.

8 ) Guaranty of Work?
Work done by the warranty company should itself be warranted. What exactly does the company guaranty? Is it different for parts and for labor? If nothing else, the company should stand behind its own work and the homeowner should not be facing additional service charges for future visits. 

If the you’re not satisfied with a repair, how does the company resolve questions about the quality of the work?

9) How are Disputes Handled?
In addition to disagreements over the quality of a repair, homeowners and warranty companies can differ over whether an item is covered, whether maintenance was sufficient and whether to opt for repair or replacement, among many other things. 

A warranty company should be able to explain how these kinds of disputes are handled, whether the company will allow for second opinions, and what rights the homeowner has to cancel the contract.

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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