Home warranty insurance has been worth it for me. To my surprise, many of my peers and close friends do not have home warranty insurance. In fact, they are not aware of what home warranty insurance is. Home warranty is different than homeowners insurance – that covers damage to your home, property, personal belongings and other assets in your home. I hope this article provides some insight into home warranty insurance.
What Is Home Warranty Insurance
Home warranty insurance is a service contract that provides coverage for your major home systems and appliances. Depending on the plan, it can cover the cost of repairs or replacement costs of items such as HVAC systems, electrical systems, plumbing, and home appliances. You can also buy add-on coverage. Homeowners pay a premium annually and a deductible (out of pocket payment if a claim is made). After a claim is made, the home warranty insurer will cover all costs and expenses related to a claim. For example, if you buy coverage and a covered appliance stops working, the insurer will have the product fixed or replaced. I will provide real life examples a bit later.
You can sign up for home warranty insurance by speaking with a customer service representative over the phone or by selecting a plan online. If it is your first time signing up, I suggest talking with a customer service sales representative. Customer service can answer questions you may have. Once you have signed up for a home warranty, you will have access to an online account. You can make claims and manage/monitor the status of claims online. Typically, you will be updated on the status of claims via text message or email.
Experience With Home Warranty
I was first made aware of home warranty agreements by my father. He is a realtor. He believes in home warranty insurance so much that he always gifts a one year home warranty plan to any customer that buys a home through him. Furthermore, over the years, he made numerous claims for various home systems and appliances – the garage door motor unit, washer/dryer, water heater, microwave, and HVAC system. My father claimed that a home warranty was a good investment, because he never knew when something expensive was going to break. Take for example, his water heater. Several years ago, after the water heater failed, he filed a claim and paid his deductible ($45 at the time). Within 72 hours, he had a new water heater installed. With the average water heater replacement cost being around $2500 dollars, home warranty insurance is appealing.
Personal Experience
My current plan, with add-ons, is $552 for one year – there is also an option to pay the annual fee by making monthly payments ($46/month), at no extra charge. The basic package includes coverage for: plumbing, heating, duct-work, water heater, electrical, (certain) kitchen appliances, central vacuum system, fans, and garage door openers – including motor. My add-ons include coverage for the fridge and washer/dryer. My contract allowed for add-ons to be purchased within 30 days of the contract start date. The deductible (service call fee) is $85.
My home warranty contract is posted on my online account and the insurer provided me with a paper copy as well – the contract outlines what is covered and what is excluded.
Earlier this year, the washing machine (that had come with our home) stopped working. I logged into my online account and made a claim. I wrote a brief description of the issue and uploaded pictures of the washing machine and model number. Next, I authorized payment of the $85-dollar deductible. A few minutes later, I received a text message stating my claim was being processed and a technician would be assigned to my claim. Later that day, I received a message from the vendor stating the appointment date and time (it was a 4 hour block). The repair was scheduled 9 days out. I did call and try to get the claim expedited, but the home warranty insurer could not assist me.
Several days after I made my claim, I received a package from the manufacturer of my washing machine. I assumed it was a part for the washing machine – I was not given any notice a package was coming – I did not open the package. Subsequently, the technician did show up during his scheduled time. He took a look at the washer and asked me if any parts had arrived. I provided him with the package I received from the manufacturer. Turns out, the package I received in the mail contained a new motor for the washing mahcine. The technician informed me the part alone was approximately $550 dollars retail. He spent close to two hours total fixing the washing machine. That was it.
The prior year I had made two claims: (1) for the kitchen sink when it backed up and (2) for the dryer when it stopped working. The issues were resolved quickly. I did not have any complaints. I calculated that the cost of the repairs and parts, without the home warranty, would have been about $900 to $1000. So far, the home warranty has been cost effective and I have no plans to let the warranty lapse.
I must note, time limits on service calls vary. I have witnessed certain home system repairs, that are considered “urgent” (like clogged kitchen sinks and water heaters), being expedited if an in-network service provider is not available within a certain time period. When I made a claim for the clogged sink, the home warranty insurer could not find an in-network provider, in my area, to repair my sink within 48 hours. Instead, the insurer gave me a $350 voucher and told me to hire my own repair person. If you look online, the service time on claims appears to be an issue that most people complain about it.
As I stated earlier, it took 9 days to get a technician out to fix my washer. However, I don’t think the actual repair time would have differed very much if I hired a repair person myself – in fact, I think the repair occurred sooner with the home warranty. If I called to hire my own provider, he/she would have had to come out for a diagnostic to determine the problem. After determining the problem, the service provider would have to order and wait for the part to arrive. The technician that came out to fix the dryer told me he had a client waiting 5 weeks to get a part for a repair. Form my experience, home warranty companies expedite and facilitate the arrival of parts.
Pros and Cons
Pros:
Protection against unexpected repair costs: Home warranty insurance helps protect homeowners from unexpected and potentially costly repairs or replacements of covered systems and appliances in their homes.
Peace of mind: Knowing that major systems and appliances in your home are covered by a warranty can provide peace of mind. It offers reassurance that you won’t have to bear the full cost of repairs or replacements should they be needed.
Budgeting and financial planning: Home warranty insurance allows homeowners to budget and plan for repair costs more effectively. Instead of facing unpredictable expenses, they can anticipate a predictable annual premium and a known service fee for any covered repairs.
Convenient access to qualified service providers: Home warranty companies typically have a network of pre-screened and qualified service providers. This saves homeowners the time and effort of finding reliable service providers themselves.
Simplified claims process: When covered systems or appliances malfunction, homeowners can file a claim with the warranty company, making the process of requesting repairs or replacements more streamlined and straightforward.
Cons:
Limited coverage and exclusions: Home warranty plans often have specific coverage limitations and exclusions. Certain items, pre-existing conditions, or components beyond a certain age may not be covered. Make sure to read the policy to understand what is and isn’t included.
Access to service providers: As mentioned in the pros section, you are limited to the home warranty company service providers. You have to adhere to their scheduling and time availability. Once a provider is assigned to your claim, you are most likely stuck with that provider.
Time for service: In addition to having the service provider chosen by the insurer, you will be stuck with the provider’s schedule. So, depending ho busy the provider is, you may not get your appliance or home system serviced quickly.
Cost versus benefit analysis: The cost of a home warranty plan may outweigh the actual benefit received. If the cost of the annual premium and service fees significantly exceeds the cost of potential repairs or replacements, homeowners may find it more cost-effective to set aside funds for maintenance and repairs themselves. For instance, when I lived in a condominium, I never purchased home warranty insurance because it was not worth buying.
You will have to see if home warranty makes sense for you. It’s important to carefully review the terms and conditions of home warranty insurance policies and to be aware of coverage and exclusions. Assess your specific needs, compare different providers, and if you think it is worth it, choose a plan that aligns with your requirements and budget.