Would You Recommend Purchase of Home Warranty?

mugnainiJuly 25, 2006

I own a well-built, 25 year old home in Northern Virginia. Neighbor recommended purchase of American Home Shield policy, which covers repairs/replacements of appliances, hvac, electrical, plumbing, ceiling fans, water heater, etc. should they break. There is a deductible, and policy costs about $450/year. Have you heard of this type of insurance? What is your opinion?

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Reprinted from the book: "Not one dollar more-How to save $3,000 to $30,000 buying your next home" by Joseph Cummins

"Home warranties are usually pushed by agents and brokers because they are a lucrative source of income-for them. For you, they offer little protection and are often worthless. More than that they steal your money-between $350 and $450 usually, for the first year-with hype and a long list of exclusions.

In existing homes, most of what you think will be covered probably won't. Usually excluded from standard warranties are refrigerators, washing machines, dryers, jacuzzis, pools and so on. To find out, however you'll have to read the fine print, often printed in light gray ink. Not exactly designed with homebuyer protection in mind.

And yes, you'll still always have to pay the service fee, usually $40-$60, just for the repairman to come out and inspect a problem. Even then, a breakdown that might be included on paper-a plumbing fixture, for example-will be rejected if the repairman concluded the problem existed before you took out the warranty (even if there were no signs of it).

These have been the subject of congressional and consumer investigations and have been held, in some cases, to be deceptive and fraudulent.

With existing homes, at least, a far better use of your money is to have a comprehensive professional inspection carried out before you complete the purchase. That way, the money you save by saying no to the home warranty will more than cover the cost of repairs or replacements you are likely to face in the first year."

    Bookmark   July 25, 2006 at 3:11PM
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I just bought my 13 year old home 7 months ago and asked for the American Home Shield Warranty to be included with my home. I was leary of it and wondered if it would be worth it, but since I didn't have to pay for it thought I'd try it out.

Well, my air conditioner died a few weeks ago. I called AHS and they sent out a a/c repairman. I needed a new compressor. In the end, it was a high cost item and high cost labor. I ended up paying 75.00 for it though so saved at least 1,000. I will keep it until I get my heating/air system replaced...but right now with it being the age it is think it is worth it to me to keep. So far it's been good to me. I too was wondering if worth it. It is somewhat a piece of mind.

    Bookmark   July 25, 2006 at 8:19PM
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Thank you both. The policy in question includes coverage for the refrigerator, washer/dryer. Sounds as if one of you has such a policy and would recommend it.

    Bookmark   July 26, 2006 at 7:28AM
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There is another thread (in the Home Repair forum, I think) in which a few people mention their unhappiness with AHS. I really think it should be treated like any other extended warranty: you are placing a bet that the item being insured will need that much repair during the term of the contract (of course, with their exclusions applying). If you can get the seller to throw it in as a condition of sale (which should have happened before a sale contract was signed), you don't risk much. But I wouldn't buy one on my own dollar unless I had to buy a house that had problems which likely would be covered.

    Bookmark   July 26, 2006 at 9:06AM
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Call American Home Shield and ask them to send you a brochure or information on what a standard policy covers. Then you can think about each covered item and consider how likely yours is to break down.

Recently two of our double-paned windows collected moisture in them. They needed to be replaced but were not covered by the AHS policy. Apparently they don't cover anything structural on the house.

    Bookmark   July 26, 2006 at 12:08PM
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I bought AHS when I purchased my home, just in case.

I never used it, but I tried. The self cleaning part of the oven didn't work, but it wasn't covered because I could still cook. The light under the microwave didn't work, either, but it wasn't covered because I could still microwave.

After that, I would still buy it for a new house purchase, but not for my current house.

    Bookmark   July 26, 2006 at 1:40PM
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I absolutely would NOT recommend home warranties. I think they are generally a rip off. I ran into a total runaroud with ours ("gifted" by the seller). I think it's a bad sign that when you google American Home Shield, 4 of the top six hits are consumer complaints.
If you do choose to get it, read the fine print carefully. I found on ours (not AHS, different company), there was a huge list of exclusions, you had to play a "service fee" for each visit (in addition to your annual premium), there was a limit to how much they'd cover for each event, etc.

    Bookmark   July 26, 2006 at 3:55PM
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With our previous house, the sellers included a one-year AHS home warranty from AHS. The biggest problem for us, even beyond all of the exclusions, is that the policy required us to have the work done by one of their contracted service providers, who were very difficult to deal with and provided very poor service.

I have heard that AHS (and likely, also other warranty companies) pay very low rates to their service providers; as you usually get what you pay for, you are therefore unlikely to receive your warranty service from a "good" company.

    Bookmark   July 26, 2006 at 11:42PM
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I also live in N.Va. and bought a similarly aged townhouse a few years ago.

I know you know what the market is like here. At the time that I was looking, many contingencies were being dropped. Like the home inspection.

I was leery. But then my Realtor offered to buy the home warranty. In the first year, I had them fix a toilet leak and a dryer issue. I'm sure if I'd gone to hire an outside pro, the cost would've been surprising to me (as a new homeowner).

But it gave me peace of mind for the first 2 years (I renewed after one year, but then canceled before the 3rd, figuring if some appliance failed, I'd have saved up enough to buy new, and believe me, all of my appliances need to be upgraded!).

There are service-call fees, and lots of small print. Together, those add up to a big down-side. But for me, it was worth it for the 2 years.

    Bookmark   July 28, 2006 at 6:34PM
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We had a home warranty for about 8 or 9 years (not with AHS). Frankly, it worked out well for us. Yes, you had to pay the service call...but that was all. The companies used for the service call were not bad companies. In fact, in almost all instances they have been companies I have heard of, sometimes even companies I had used myself before I had the home warranty. We did have some big ticket repairs and it was nice to only have to pay the service call. We never had any issues with exclusions. There were things that weren't covered but it was clear what they were. In some instances we could have paid more for the coverage but chose not to.

I only had one problem in all that time. We had a kitchenaid dishwasher. The parts warranty was still in effect but labor wasn't. So we called on our home warranty. They would make the repair but insisted we get the part from Kitchenaid. That took 2 months to accomplish which was annoying.

    Bookmark   July 28, 2006 at 10:23PM
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We have AHS for our home (we built it in 1995). We have been pleased and feel we come out ahead each year.

We pay 45.00 per service call and save every year the cost + the annual fee. We have never had a problem - down to the ceiling fans on the back porch, I wouldn't stay home without it.

    Bookmark   August 17, 2006 at 11:34PM
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Maybe there are different policies? Mine excluded most things just because they were too old at the time I bought the house. I didn't renew once it expired and instead put the premium into savings. As it turned out, I would have had very little return on the investment if I had continued the insurance. Unlike health insurance, the chance of a covered repair running into the thousands of dollars seems very small- with regular budgeting I have been able to cover the cost of replacing most of my appliances over the years.

    Bookmark   August 22, 2006 at 12:32PM
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Dreamgarden and others if for nothing else, these warranties pay off in the sunbelt for the Central A/C alone, particularly when you are at quite a distance.

    Bookmark   August 27, 2006 at 8:18PM
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(as usual - LONG!!! )

We had a Home Warranty when we first bot - not sure what company - (about 3 yrs ago).

We had problems with 2 of our 4 ceiling fans which we noticed shortly after we moved in. (I'm not sure, but it was somewhere between $40 - $60 per service call) We called, and a husband/wife team showed up at our door. They checked all 4 ceiling fans. (CLEANED the tops of ALL the blades too! haha)

Fixed one, and a 2nd needed to be replaced. They went to nearest home improvement store (about 20 miles round trip), bot a new fixture, replaced the defective one. (And left the old fixture!)

Then, our central A/C / heat was sounding funny, and didn't seem to be doing the job. Someone was sent out. He got on roof of house and told us we needed a (motor or??? I don't know - something big up there - haha - hubby knows) He had to order the part and return - so because of this, we had to pay for TWO service calls. But he replaced the part.

Then about 3-4 months after we were here, I "thot" I felt a "sorta warmish" spot in a corner of the kitchen on the cold tile in my bare feet in mid of winter. Over about 3-4 months, the spot got warmer and wider. The gas and water bills got higher. Finally it got to the point that my feet would BURN on the tile - it was so hot. PLUS, I noticed in the dining area - warm spots THRU THE CARPET! I kept telling husband about it... but he doesn't walk around barefoot! LOL! (Maybe it was the huge gas and water bills that finally made him believe.)

We called our regular insurance company. They would do NOTHING unless there was obvious structural damage. Whatever that means? Well, what that meant was, the tile in the kitchen had to be completely messed up! (I felt like taking a hose to the kitchen and flooding it!)

We called home warranty once again. They sent someone out who refered us to someone else. We had a hot water leak under the slab. They re-routed it (rather than tearing out our whole kitchen floor and cabinets).
We DID have to pay some for that fix (along with the 4 months of high gas & water bills), but not as much as we WOULD have had to pay had we not had the warranty.

Then the problems came. Even tho our regular insurance would NOT do anything, they threatened to cancel us unless we provided proof of repair (which we did). But they were so inept, a YEAR passed and we got a cancellation threat notice out of the blue! Because we never provided proof! WE DID! And we sent it AGAIN, and they STILL couldn't get it straight.

Needless to say, I was talking to someone at a weed abatement company, and he told me we have the worst insurance company! He had personally dealt with them in the past. So, we switched Insurance companies (which our original one couldn't even get THAT simple fact straight!!!)

It took a long time, but FINALLY we got it worked out.

In the mean time....
When it came time to renew our Home Warranty for the 2nd year, the rates were to be increased, and they faxed over the policy details. I studied it with a fine toothed comb, and decided they basically were NOT going to cover much of anything - SO MANY EXCLUSIONS.

When we called the guy. He tried to pull this "well we fixed this and we fixed that for you...".
Which I told him, yes you did. And we paid for "this and that" too! "However, with all the exclusions this time around, I'd basically be throwing money away, because you won't cover anything!".

It was so bad, it wasn't even a matter of "what WON'T you cover". but "what WILL you cover"?
(The "WILL COVER" list was WAY shorter than the "WON'T COVER" list.)

So, If my dishwasher gives out, I'll just do them by hand like I was raised.

    Bookmark   September 1, 2006 at 8:45AM
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The AHS was provided to us when we bought this house. The 2nd day I was here in the middle of July, the fuse blew on the AC. We're in AZ and it was 115 outside. I called the warranty and they sent someone out and fixed it. I paid $40.

I was talking to my boss about it and she said she and her husband renewed it for a couple years because you just never know what plumbing will go or if the AC will die. Here in AZ, a new AC unit is expensive and considering ours is the original from the house, it won't last forever. I'd rather pay $450 for that security of replacement than $4K out of my pocket for a new AC or plumbing repairs.

    Bookmark   September 4, 2006 at 1:30AM
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