Is a Home Warranty for You?

Whether you’ve recently purchased a home or are considering renewing the home warranty that came with your home, chances are good that you’ve got questions. Big ones. You’ve probably heard a lot of different things about home warranty programs, ranging from really awful to crazy and near lifesaving. Like anything that remotely resembles an insurance program, there’s a lot of nuance behind individual experiences.

What is a Home Warranty?

You can think of your home warranty as a type of insurance if that makes it easier to understand. It’s technically a service agreement, kind of like what you’d get with a new car. Individual warranty programs have contracts with individual service providers who will come out and diagnose your problem, arrange for parts and then return ready to fix it. The quality of any single home warranty program, then, is only as good as the contracts that the company has with its service providers.

The yearly costs involved range widely, with very basic plans with limited coverage starting around $300 and comprehensive plans that include things like pool repair pushing the $1,000 mark. There’s also typically a service call charge and there can be an upper limit on the costs the warranty will cover.

Depending on the age, size and complexity of your home, that $1,000 plan still may look pretty good next to actually making needed repairs out of pocket. It’s all a matter of perspective.

How Does a Home Warranty Work?

It cannot be stressed hard enough that you should read the entire document before agreeing to a particular home warranty. Although they may seem the same, what one company will cover may be completely excluded by another. Your Realtor should be able to guide you toward a product that they have had a good experience with and consistently delivers good results. If they can’t, call the Better Business Bureau and read reviews online to be certain the company you choose will deliver the goods.

Working with a reputable warranty company is a simple process. It goes something like this:

1. You notice that the sink is backed up unexpectedly. Running the disposal doesn’t help and you’re not a plumber. You don’t even play one on TV.
2. You call the number to your warranty company.
3. An operator answers and asks for identifying information, along with a brief description of the problem.
4. You explain that your sink is full of water and you’re worried you may soon drown if someone doesn’t come to help.
5. Your operator collects all the necessary information, triages the case as either emergency or not, and does one of two things: gives you the number to a service provider OR promises to contact one on your behalf.
6. No more than a day later (depending on your urgency level), the provider calls you to arrange an appointment.
7. The appointment is set, the service provider comes out and figures out what the problem is. If it’s an easy fix, they may deal with it right then. If it’s a costly repair, they’ll need to go back to the warranty company and try to figure out how much is your responsibility and how much the company will cover.
8. You authorize a costly repair, it’s made, you pay your part and go on with your life. Or you decline it, kick the dirt and call the warranty company back for a second opinion, then go through the steps above again.

Warranty programs can be hit and miss, there’s no doubt about it. Sometimes the things they cover versus the things they don’t seem completely arbitrary. But, there’s plenty of competition in this arena that will allow you to get into a program you can afford and will be able to use if need be.

The Biggest Warranty Program Con

This has already been touched on, but bears repeating. The biggest drawback to a home warranty is the very thing that leads some people to believe that they’re cons: they don’t cover everything. Again, this is highly dependent on the program and service level you select, but you have to remember that a home warranty is not the same as homeowner’s insurance.

Acts of Nature, shifting foundations, broken sewer lines and broken windows are among the biggest pain points for home warranty users. These items are often not included because of the massive expense they represent, as well as the fact that many are already covered under your homeowner’s policy.

There’s absolutely every reason to read your warranty paperwork thoroughly so you know what will be and won’t be covered. That way you’ll be armed to fight a refusal to pay thoughtfully and efficiently should it occur in error.

Intangible Benefits Come With Warranties

There are a few people who end up winning the lottery with their home warranties. They move in and everything they touch just starts breaking. These are items that showed no sign of serious wear and were installed correctly, their breakdowns were wholly unexpected. But suddenly, that homeowner has a new furnace and air conditioner, the pool pump’s been replaced and so on. This really does happen, and even at $800 a year and $75 a piece for service calls, it represents an incredible savings.

However, most people don’t get that lucky and if they use their warranty at all, they only need it once or twice during their ownership. This is why it’s important to consider the intangibles with these programs. Sure, your breaker box seems fine today, but would you know what to do if it started malfunctioning? That’s where the home warranty really provides a powerful value.

People don’t buy home warranties to save money on home repairs. They do it to control their repair costs over the long term. Usually, they will spend a lot more on the home warranty than they would just hiring their own contractors, but these same people admittedly don’t know who to call or how to vet a potential service provider.

Service provider vetting is a service that the warranty company provides with their yearly fee. Peace of mind, at a cost, is the thing that many home warranty buyers end up choosing. For the highly risk averse, it’s a total win — these people can go on with life and not have to give home repair another thought.

What If You Could Find Vetted Service Providers and Still Save Money?

If you’d rather have a relationship with your plumber, roofer or other service provider rather than have one with a call center, a home warranty might not be right for you. Instead, you should connect with a referral community like HomeKeepr where you can get to know your people on a personal level, thanks to your Realtor’s recommendations.

There’s just something about telling your friends that “my electrician Greg came right over and fixed the faulty wiring,” rather than “I called the warranty company and some guy showed up” that can give you a huge feeling of security in homeownership, whether these are your first steps or you’re well on your way to your next address.