don't always provide peace of mind
Herb Weisbaum TODAY
June 17, 2013
at 10:12 AM ET
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When you buy a
house, you know things are going to break. Is it worth paying hundreds of
dollars a year to repair or replace your furnace, washing machine, refrigerator
or other major appliance when it breaks? Only you can decide.
Major home appliances are costly to repair
and expensive to replace. That’s why some homeowners spend hundreds of dollars
a year to buy a home warranty, sometimes called a service contract.
Home warranties are supposed to provide
peace of mind. But in many cases, people who try to use them when something
breaks down experience disappointment and frustration.
Online bulletin boards are filled with
disappointed and angry!” – Kathy of
“They don't do
anything they said. All they want is your money.” – Mary of Lancaster, Texas
“They made me
wait a week, only to tell me my broken washer is not covered under my plan!!!
So far, this is the second item they claim is not fixable under my plan!!! Save
your money, and get your own repairs done!!!” – Rozelia of Oakland, Calif.
Home warranty companies have been the
worst-graded category on Angie’s List for eight years in a row. Nearly half of the member
ratings were unfavorable.
Cheryl Reed, the website’s director of
communications, told me some of the complaints deal with poor service, but most
result from unrealistic expectations about how a service contract works.
“People were disappointed because they just
assumed the home warranty covered everything in their house in the way they
wanted it covered,” Reed said. “They never really took the time to read the
warranty and understand what the process was.”
For instance, you may think you need a new
water heater, but the warranty company may decide it only needs to be repaired.
Under the terms of the contract it’s their choice – not yours. Even worse, they
may say the repair isn’t covered at all.
Angie’s List member Steve Donahue, who
lives near Houston, complained after his home’s air conditioning system broke.
The service technician diagnosed a number of problems, but the warranty company
denied the claim. They said the humidifier hadn’t been properly maintained.
Donahue told me his system didn’t have a
humidifier. You don’t need one in that part of the country. He called the
warranty company to complain, but could never speak to anyone in charge.
“I paid a lot of money and I never did get
much of a return out of it,” he said.
Stephen McDaniel, assistant executive
director of the Service Contract Industry Council,
told me he is concerned to hear about the complaints, but he doesn’t feel the
industry has a problem. If people would read their contracts before they need
service, he said, they would know what to expect.
McDaniel believes most people are happy
they bought their home warranty. The ability to call for help 24/7, and have
someone show up at your house within a set period of time – even after hours
and on weekends if it’s an emergency – “is a valuable service” that’s worth the
price, he said.
A perk for homebuyers
When you put your home on the market, you
want a competitive edge. An increasing number of sellers believe a home
warranty can do that – a little something extra for the potential buyer.
Nearly 80 percent of the homes in
California are being sold with a warranty right now, according to real estate
expert Ilyce Glink, who runs the website ThinkGlink.
“Buyers view them as a sort of insurance
policy should something go wrong,” Glink said. “Buyers may assume everything is
covered, but typically it only includes appliances that are working properly on
the closing date.”
So, an ongoing leak would probably not be
covered. A swimming pool or sprinkler system typically requires separate
(Note: In most states, a home warranty is
not insurance, even though it may be backed by an insurance policy.)
Service contracts that come with the home
are typically for one year. Then you get inundated with offers to extend the
Glink’s advice: Don’t do it.
She believes they are overpriced for the
value they deliver. The problem may not be covered. The company may decide to
repair rather than replace. Plus, you have to pay $50 to $100 every time the
service technician comes to your house.
“Remember, their goal is to do everything they
can to avoid paying for that repair or replacement,” Glink said.
The Service Contract Industry Council
points out that anyone who has second thoughts about buying a home warranty can
cancel at any time with a pro-rated refund.
Is this for you?
When you buy a house, you know things are
going to break. Is it worth paying hundreds of dollars a year to repair or
replace your furnace, washing machine, refrigerator or other major appliance
when it breaks? Only you can decide.
The editors at Consumer Reports say the
peace of mind isn’t worth the price. “For most people, it makes more sense to
put money in a home-maintenance fund,” they write.
One more important factor to consider: The
warranty company decides which repair company comes to your house. You don’t
have any say in that. If you have a trusted plumber, electrician or appliance
service, a home warranty may not be for you.
Contract Industry Council strongly
believes in the value of a home warranty and says it has the happy customers to
prove it. The trade group promises to help anyone who has a problem with a
My advice: If you didn’t get what you paid
for, file complaints with the state agency that regulates these services and the
Better Business Bureau. If you think you’re right, don’t back down.
Dream Home TODAY!!