If you own a home, you can expect some costs besides your monthly mortgage payments. Unlike most renters, homeowners are responsible for all the maintenance and repair costs associated with their home. If you have an older home with older appliances, you can expect some of these appliances to break down or fail. Home warranties exist to cover these items. Companies that sell home warranties advertise that they will repair or replace broken down appliances and systems (like HVAC), providing a homeowner peace of mind. But there may be hidden costs, limitation, and exclusions. So is a home warranty worth it?

TrustDALE has just added a new segment, 'Just So You Know,' featuring advice and information from Dale Cardwell that every consumer deserves to hear. One recent segment covered home warranties. You can read more about Dale’s review here.

What a Home Warranty Claims to Be

As advertised, home warranties sound like a great way to insure yourself against the costs of repairing or replacing appliances and home systems. For an annual premium starting around $350-$500, a home warranty will protect you from sudden expenses. For instance, if a refrigerator breaks down and you don’t have a home warranty, you would have to call out a specialized appliance repair technician. Once the technician diagnoses the problem, there will be charges for labor and parts to repair the problem. If the problem can’t be adequately fixed, you may face the cost of purchasing a whole new refrigerator.

So it can seem pretty appealing to purchase coverage that will cover the cost of repairing or replacing your appliance. Why wouldn’t you get a home warranty?

Beware of Limitation and Exclusions

The main issue with home warranties is in the fine print. Read your contract carefully to learn about limitations and exclusions. Often, the coverage you receive is nothing like the coverage you imagined or expected when you purchased the home warranty.

Take, for example, the refrigerator that broke down. If you were paying for the repairs out of pocket, the first thing you would do is look for the right contractor to do the repairs. The right contractor is someone whom you can trust, who has good reviews, and who can come to your home fast. The last thing you want is to be waiting around for days while your food slowly spoils in a non-functional refrigerator.

Now, let’s consider what you might expect from your home warranty company. The basic expectation is that the home warranty will cover the cost of the repair. And if the refrigerator can’t be repaired, you expect your home warranty to pay to replace it. However, that might not be exactly what you get.

What Happens When You Make a Service Call

The first thing that happens when your refrigerator breaks and you have a home warranty is not calling a contractor or repair company. Instead, your first call will have to be to the home warranty company. The home warranty company, not you, will determine if this is really an emergency repair. If the home warranty company decides this is not an emergency, you’ll be stuck with a broken refrigerator and rotting food for 48 hours or more. Meanwhile, the home warranty company, not you, will choose a contractor. If you’re unsatisfied with the contractor they choose, your don’t have many options. Either you can accept their contractor, or you can decline to use their services and pay out of pocket, even though you already paid once when you purchased the home warranty.

Once the contractor chosen by the home warranty arrives, they will diagnose the problem and determine if the appliance can be repaired. But once again, the choices to be made belong to the home warranty company, not you. If your contractor says that the problem can be fixed by rebuilding or replacing a part, that is the final word. And the contractor, along with the home warranty company, will get to decide how the piece is repaired or replaced. You may not get new factory parts. You may get off brand or refurbished parts instead. And you have no choice but to accept them.

Replacing Appliances With a Home Warranty

If the refrigerator needs to be replaced, you may be in even worse shape. You might have expected that the home warranty company would just buy you a new refrigerator. However, most home warranty companies prorate their coverage. That means that you won’t receive the full funds needed to replace your nearly new, three year old fridge. Instead, you will receive a prorated value for the fridge, which is significantly less than the cost of a new fridge.

If the home warranty is providing the replacement, you might be pretty unhappy with what they offer. Here is an example of the language in one warranty’s contract regarding replacement of an appliance:

The home warranty company will be responsible for replacing your appliance with an appliance that has “similar features, capacity, and efficiency, but not for matching dimensions, brand or color.” That’s a pretty big limitation.

Imagine that when you bought your refrigerator you did a lot of research to find one that you love. Your new refrigerator has a beautiful a stainless steel finish that matches your other appliances perfectly. In addition, it is just the right size to fit snugly into your kitchen, making it look like it was always meant to be there. It’s a brand you know and trust, that you researched and feel comfortable with.

When the home warranty company offers you a replacement, you may get an entirely different refrigerator. The contract states that they don’t have to match dimensions, brand, or color. So you may be offered a black refrigerator that doesn’t match your other appliances, is too short for your space, leaving an awkward gap between the appliance and your cabinets, and that is a brand you specifically didn’t choose when you made the original purpose. And you have no recourse. The replacement offer is a “take it or leave it” offer.

The above section of the home warranty contract continues to say that the home warranty company “is not responsible for matching any feature of an existing item that does not contribute to the primary function of that item.” Guess who decides what the primary function of the item is?

Let’s say you bought a fridge that conveniently offers both cubed and crushed ice. It also has a handy light that comes on when you push the knob to get ice. In addition, you love that you have the option of turning the light on and leaving it on, even without pushing the knob. You also picked this fridge because you like the way the ice maker has easy to read buttons that illuminate to show you exactly which option is selected.

Your home warranty company may decide that none of that contributes to the primary function of a refrigerator. So your replacement might have a completely different ice maker, even including features that you intentionally avoided when making the original purpose. And again, the offer is “take it or leave it”.

After all is said and done, you will also be responsible for a service fee for the technician who came and did the diagnosis. That service fee varies with different plans, but can cost $100, $150, or even more.

You can begin to see where the exclusions and limitations of a home warranty contract can leave you unhappy with your options and with little or no recourse.

There Are a Few Good Companies Out There

While many home warranty companies can surprise you with what they don’t cover, TrustDALE has found one to recommend. America’s Preferred Home Warranty is a company that Dale believes in for two reasons. The first reason is that they allow you to choose the contractor who is going to fix your appliance. That gives you the freedom to choose a company you trust. The second reason is that they put all their information, including what’s covered plus any exclusions and limitations, right up front. You know what you are paying for and can make an informed decision about the coverage you want. So if you decide you need a home warranty, skip the competition and go right to America’s Preferred Home Warranty.

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