Are Home Warranty Companies Worth the Money?

August 7, 2010

American Residential Home Warranty

When you buy a home, you will probably be asked if you want to use a home warranty company to cover repairs to certain issues that might crop up. If you are buying a new home, chances are that the builder offers a one year home warranty automatically. You have the option to purchase a home warranty after that, with warranties covering your repairs a year at a time. You can continue to pay the premium each year, and then only pay a small fee for the service call if you have claims.

For the most part, a home warranty is a service contract. When deciding whether or not a home warranty is right for you, it is vital to understand what is covered. Most home warranty programs will cover what are considered “moving parts”: appliances, heating systems, air conditioning, some plumbing and some electrical. However, most of the time the home warranty company will not cover issues related to poor maintenance of the home, or to bad construction. Carefully read the paperwork to understand exactly what to expect from your home warranty.

Home Warranty Advantages

There are some advantages to participating in a home warranty program. Warranties usually cost between $250 and $600 a year, with many deductibles ranging from $30 to $100. (Some home appliance warranty programs charge premium only, with no deductible.) If you end up with a serious plumbing problem, or if your heating system breaks down, having the home warranty can save you money. If you had a $300 warranty with a $50 deductible, and you needed a new $1500 heating or cooling system, your home warranty policy would save you a lot of money. To get an idea of what a home warranty might cost you – Click here

Home warranties can provide peace of mind when you are living in an older home. Homes that are at least 10 years old, and that have not had any replacements to their “moving parts”, might begin to see more problems. If you own (or plan to buy) and older home, and you are concerned about the cost of possible repairs, home warranty protection might be desirable.

Home Warranty Disadvantages

One of the biggest issues is that some home warranty companies are slow to conduct repairs, and they may deny claims. You may have to fight with the home warranty company to convince representatives that certain repairs and replacements fall under the plan you have. In a lot of ways, it can be similar to dealing with an insurance company.

Another drawback is that you may not need repairs. You could be spending hundreds of dollars a year on a home warranty plan, only to never have a significant repair. By the time you do have a serious problem, it may be that you have paid so much in premiums that it isn’t worth it. You will need to do a cost benefit analysis to determine whether or not the continuing home warranty protection is worth the cost. Chances are, though, that after the first year (if you have a new home warranty), you might want to hold off buying protection until the home is a little bit older.

Home Warranty Companies

There are many businesses offering this service so its best to compare home warranty companies. You will be hard pressed to find a home warranty service that does not have complaints against it. This is because home warranty policies naturally stir up strong feelings — especially if a claim is denied. Some of the home warranty companies that are well-known, national and somewhat reputable companies include:

  • Sensible Home Warranty
  • Colonial Home Warranty
  • American Home Shield
  • Old Republic Home Warranty
  • 2-10 Home Buyers Warranty
  • First American Home Warranty

It is also worth noting that there are regional and state home warranty companies that may have better ratings, such as Blue Ribbon Home Warranty in Colorado, or American Residential Warranty in a limited number of states – to check if they’re available in your state Click here

Home Warranty Reviews

You can find home warranty reviews and ratings online, as well as check with the Better Business Bureau. There will always be complaints, but you can look through reviews and read experiences to get an overall feel for which home warranty company is least likely to cause you problems — and help you figure out whether a home warranty is worth the money in your individual situation.

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Miranda

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Miranda
Miranda writes about personal finance almost every day. An experienced freelance writer, she's covered your money online and in print from every angle and is always looking for new ones.

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14 Responses to Are Home Warranty Companies Worth the Money?

  • Joel

    Have used AHS for about 4-7 years and have been mostly satisfied with their responsiveness and coverage.
    Recently, however, they sent a renewal notice that raise the cost of a service call from $55 to $75 per call.
    I’m planning to jettison them and have found other companies with comparable coverage at about the same annual cots but with lower service calls costs.

  • JT

    SO.. home warranties. Just like the many of people concerned to get them or not. Get an inspection done on the home.. it costs between $100-250. They will look at the nitty gritty on every crevise in your home. I have brand spankin new appliances, heater and a/c unit. The pluming sucks in my 33 year old home, but home warranty doesn’t cover that “mainentance” issue. soooo annoying. If you have a handy family member, pay them to fix things that break. it will save you the service charge of $100 and for them to say “oh, you need this part, but it’s too expensive to fix, so too bad. you’re on your own.”

  • Michelle Weingart

    Stumbling across this article, I would like to share my experience that I had with Sensible Home Warranty that I posted online:

    I recently encountered a problem with the A/C system over the weekend. I placed a call the the Sensible people Saturday evening and was told I would have to wait some time or a repairmen as it was 8pm on a Saturday evening, understandable. A very nice lady followed up with me Sunday morning and said she could schedule a tech for first thing Monday morning which I agreed to. A few hours later, I got a call from a repair man saying he was in the area and wanted to know if he could stop by to look at my system. He showed up a half hour later and fixed the problem, we needed a new thermostat. I got a call later that evening from the Sensible people again to make certain we were satisfied.
    This was pretty much a painless ordeal, something I am not used to considering I have dealt with several other
    shoddy companies in recent years. I am a new customer with them by my experience thus far has been excellent.

  • J Hartnet

    I liked this article, I certainly got my monies worth from colonial home warranty in just one repair they did for my air conditioner and I have 10 months of coverage left. the other company I used before colonial also provided good service but pricing was better at colonia.

  • ajc @ 7million7years

    When we rented our Chicago house (we moved back to Australia but couldn’t sell it), having a Home Warranty was a condition put in place by the tenants.

    In general, though, insurance policies – like most packaged financial products – represent relatively poor value for the consumer.

    You should only buy them if you could not afford the cost of a likely claim; with white goods, this is typically not the case (if your washer breaks down, use a laundromat until you can buy a new one, etc.)

  • Miranda

    Sandy: I think it goes back to reading everything, and understanding what is included. And you are right; in some cases those major things may not be covered. So in many cases, it may not be worth the money at all.

  • Sandy L

    The house I bought came with a home warranty. After 4 months, my sewer backed up into the cellar and I was psyched to have it. The company claimed that the issue was actually not with the home but with the yard (ie, sewer is not part of the home…even though the home is connected to it and the issue was basement flooding which is clearly part of the home). The claim was DENIED.

    I wouldn’t spend money on a policy. It was useless when I needed it.

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