Home warranties have become a popular option for homeowners, with the ever-increasing cost of repairs. Many people want peace of mind knowing that they’re covered if a major system or appliance breaks down.
These warranties are even recommended by some real estate agents when you purchase a home.
However, homeowners should read the fine print before signing a home warranty contract, as in many cases, they end up disappointed and frustrated.
Watch as a homeowner shares her frustration with her warranty company:
Kevin Brasler, executive editor with Consumers’ Checkbook, says they often use fear and anxiety as a marketing tool.
“They say, ‘Oh, you can have all these expensive problems around your home. Your air conditioner could die, your furnace could die, your appliances could go out,’” he said. “Then they turn around and sell you a warranty, a peace of mind policy that promises to take care of all these expensive problems.”
Brasler says in many cases these plans aren’t worth the cost, with plans averaging about $1,000 a year.
"If you dig into the fine print on these policies, which we've done, there's lots of stuff that's either not covered or not covered very well,” he said.
Woman left facing huge bill when AC fails
That’s exactly what happened to Monique White. Her central air quit during the hottest week of the year. “It was 86 degrees,” she said.
Her home warranty company dispatched a technician who discovered a coolant leak. White figured the repair would be covered by the home warranty she was paying $700 a year for. But it turns out that much of the repair was not covered.
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“I received an estimate of out-of-pocket costs of $3,900,” White said. “I thought it was an insult!”
Contracts filled with exclusions
Brasler says there are usually payout limits on claims of about $1500.
“There's so many fine print exclusions in these contracts, they can weasel out of these deals pretty easily and often people don't get the repairs that they thought they had coverage for,” he said.
They will also use tactics to deny paying for a service due to what they say is negligence on the part of the homeowner, according to Brasler.
“They'll say, ‘Oh, you didn't maintain that furnace properly, or you didn't maintain that air conditioner properly,’” he said.
The biggest problem with these companies, according to Brasler, is that you’re required to use the technician they choose.
You’re also required to pay a $75 to $150 service call for a repair person to come out.
His research found that well-established repair businesses don’t like working with home warranty companies because they pay very little, so the technicians used for home warranties are usually less experienced.
Another concern: “If they make the issue worse, if they instead of fixing your furnace, break it for good, and this happens, the home warranty companies assume no liability,” he said. “There's no guarantees of the workmanship that's going to be done.”
Brasler also notes that home warranty companies operate under relatively lax regulatory standards.
“The reason they're very careful to point out these are service contracts and not insurance plans is that if they're insurance plans, then every state in the country regulates insurance coverage,” he said.
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White is now hiring her own company to make the repairs and has decided to drop her home warranty.
“What is the point of having this, if they are not going to deliver on what they advertise?” she said “I would just encourage everyone to save their own money. You’re just better off having a rainy-day fund.”
Before taking out any home warranty plan, be sure to check their ratings with the Better Business Bureau.
That way, you don’t waste your money.
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