It seems that out on the web you get opinions on two sides of the spectrum. Either home warranties are harbingers of peace of mind, or they neatly chew spam with big teeth. (“neatly chew spam” is my way of saying “they suck” but, I have always hated the expression “they suck”, so I take the liberty of coining an expression for greater comfort and humorous possibilities.)
I am here to bring some clarity to this decision, speaking as a thoughtful customer.
The fact is that home warranties have limits. They have advantages and disadvantages just like any other product or service. They are the red-headed stepchild of the insurance industry. And they are misunderstood by those who purchase them. The more you are aware of where misunderstandings are likely to occur and where the warranty limitations are, the better you will be prepared to decide whether a home warranty is right for you, and the less your frustrations will be if you buy it and then have to use it.
Misunderstanding #1 The home warranty will cover everything in my home.
No, it won’t. You are mistaking a home warranty for home insurance. This is when you have to look carefully at terms and conditions and pay very close attention to limitations. Take note of whether pre-existing conditions are covered or not.
Misunderstanding #2 The home warranty will cover all costs of repairing/replacing covered items.
No, it won’t. Unfortunately, this is one of the things that home warranty companies could be a little more up-front about. The fact is, home warranties (H.W.) have dollar coverage limits, just like other insurance companies do, and if the costs of repairing/replacing go over those limits, then you will have to foot the rest of the bill. It would be very nice if customers knew this before they need the warranty rather than during the stressful process of requesting service to fix/replace a failed appliance or system.
Here’s a recent example. I have a H.W. with a company that will remain nameless (I’m using them as a typical example, neither bad nor good). My air conditioning unit broke down and the H.W.-sent service person declared it needed replacement. When I spoke with someone from the H.W. authorization department, she told me that replacing the 25-year old AC unit would require making a lot of modifications to our home, depending on how codes for AC had changed over 25 years and that although the H.W. would pay for the replacement of the unit, there would be additional costs that might be over the warranty coverage limits, and we should be prepared for out-of-pocket expenses. This information about coverage limits was news to me. Being the realistic person that I am, I realized that it would be best for me to know what those limits were and what typical costs were so that I would not expect more from the home warranty than it was obligated to deliver. (I’m trying to save myself aggravation, you see.) I also wanted to know how high those out-of-pocket expenses could get so that I would not be surprised or resentful when it came time to pay them. If those expenses turned out less, then I could count myself fortunate. She shared those expenses with me, and I was very appreciative.
I would like to expect amazing things from every person, service, or product, but I know that is not realistic. People, service, and products can only do so much, so I have to learn to manage my expectations. In the case of home warranties, if the companies that offered them would communicate clearly the dollar amounts of coverage limits, that would go a long way towards managing customer expectations. People are happy when they know exactly what to expect and they get it. Trouble happens when they expect home warranties to cover everything and then they have to be disappointed. People will understandably feel gypped.
Misunderstanding #3 The home warranty company should, can, and will repair/replace my __________ today or tomorrow.
No, it shouldn’t, can’t, and won’t. This can be the most disappointing thing for people to discover, so understanding this ahead of time is very important. The trouble is, when people find out home warranty companies shouldn’t, can’t, and won’t fix their appliances/systems the same day or the next day, they jump to the conclusion that the home warranty company is deliberately cheating them and putting them through misery. This is not true.
They shouldn’t repair or replace your _____ today or tomorrow because it takes time to figure out what is wrong and what to do about it. Since they don’t live in your home, they require the service person to act as their agent and determine what is wrong and pass that information along. It is just as foolish for a company to act without the facts as it would be for you to act without the facts.
They can’t repair or replace your ________ today because they have many customers to help. You aren’t the only one. If you were the only one calling for service, they could devote all their time to you. They are taking calls all the time.
They won’t repair or replace your _______ today because their decisions have to go through channels and be rubberstamped by the proper people.
Here are the hard facts of the matter. With the purchase of a H.W., the task of choosing a service company, diagnosing the problem, determining what should be done, and how much to pay has been outsourced from you to the H.W. company. Essentially you have paid a fee to relinquish speed of resolution and control of the process to the H.W. company in the hopes that it will cost less to do so. Homeowners must realize that instead of being able to call a repair service immediately, they will have to call the H.W. company to request service (takes at least one day). Instead of being able to call the repair company of their choice, they will have to accept whoever is sent by the H.W. company to diagnose the problem. Instead of being able to make the decision themselves to fix or replace the appliance or system, the H.W. company will make it. Instead of being able to ask for the repair to proceed immediately while the repair person is there, the homeowners will have to wait for the repair person to communicate with the H.W. company and for the H.W. company to make the decision. (This can take several days.)
As you can see, there is a real tradeoff of freedom and speed involved in obtaining a H.W.
It is true that the homeowners can still do an end-run around the H.W. company and call the service person themselves and pay for it themselves, but they should not expect the H.W. company to automatically reimburse them. The H.W. company is very cost-conscious and are inclined to look with disfavor upon service companies who are not in their preferred network.
The issue of this tradeoff should be very carefully weighed. In theory, it sounds great to pass the risk of substantial repair/replacement costs on to a H.W. company. However, in practicality, the slow speed of resolution can cause real human suffering in proportion to the importance of the system that fails.
For example, it would be great if our air conditioning system failures could be detected in the wintertime when we aren’t depending on it, but such is not the case. Instead, failure of air conditioning systems occurs or is discovered at the times when it is most needed and during the time when a slow resolution of multiple days is the most uncomfortable and inconvenient. Not only this, but it may happen that a freak accident causes widespread failure in a locale and then the H.W. company is inundated with service requests, which delays resolution even further. As I type, the air conditioning in my home has been out for six days as I wait for my H.W. company to authorize my A.C. unit’s replacement. It took me five days to learn that an exploding transformer in the Mesa area led to a fire, which led to a number of other people losing their A.C. units. This is during the monsoon season with temperatures above 100 degrees. My H.W. company has been absolutely swamped with service calls. I am not miffed about this. This is just part of having a H.W. To expect the H.W. company to service ME immediately when so many others are in the same position of need would be rank selfishness.
In short, before you buy a home warranty, you need to think carefully about how you will cope for multiple days if:
• your air conditioner fails during a heat wave
• your heater fails during a cold snap
• your water pipes burst
• your roof leaks
• your toilets overflow
• your refrigerator fails
• your dishwasher fails
• your clothes washer or dryer fails
A home warranty is not for you if you can’t cope with the loss of functionality of these items and systems for more than a day. This applies to families with very small children (Small children may not understand why they are so uncomfortable and protest loudly and at length.) It may apply to families caring for elderly parents in their homes. It may also apply to landlords who have to meet tight deadlines.
Who might a home warranty help? A home warranty might be for you if you recently bought a house and are short on cash to pay for expensive repairs. That time just after purchase and before you can save a tidy sum for emergencies leaves you particularly vulnerable to discovering problems that didn’t show up during home inspection. A home warranty can bear a good portion of that risk for you. Just remember the tradeoff you are making and be prepared to cope for multiple days in the event of sudden loss.
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