By Randy Hutchinson
President of the BBB
Reprinted from The Jackson Sun
In this column, I’ll be talking specifically about home warranties that cover major systems and appliances rather than builder warranties on new homes. Appliances in a new home will usually be covered by the manufacturer’s warranty for some period of time.
A home warranty is different from homeowner’s insurance, which covers loss or damage due to perils such as fires, hail and theft. A home warranty is a service contract that covers repair or replacement of specified home components.
Home warranties typically cover central heating and air conditioning systems, kitchen appliances, clothes washer and dryer, and plumbing and electrical systems. Items that are not covered, or that may require an additional fee, include window air conditioning units, septic systems, garage door openers, and free-standing freezers. This is not an exhaustive list of what they do and do not cover. They also don’t cover routine maintenance like replacing filters in a furnace.
A basic home warranty costs about $350 to $500, with the cost going up for additional coverages. You’ll pay a service fee ranging from $50 to $125 for a repairman to visit your home. If two different kinds of repairmen are required, you’ll likely pay two fees. Home warranty companies have agreements with service providers and you’re usually required to use whomever they send.
If the problem is covered by the warranty, the company may choose to repair or replace the appliance or other item. Some warranties only pay for its depreciated value. You may not have much say in the brand or model of a replacement, although the warranty company should provide an equivalent product. Most home warranties don’t cover consequential damages, such as food that spoils when a refrigerator breaks down.
You can buy a home warranty when you purchase the house or anytime thereafter. Sellers often include them to allay a buyer’s concern about incurring unexpected maintenance costs. Home warranty companies don’t require an inspection of covered items, but they have to be properly installed, properly maintained, and in good working condition. Pre-existing conditions aren’t covered.
Home warranty companies generate a lot of complaints to the BBB and other agencies, most of them concerning claims that were denied. While most people don’t read the fine print in contracts, it would behoove you to do so before buying a home warranty. You should clearly understand what is and isn’t covered and any exclusions or limitations.
Some financial experts don’t think home warranties are a good deal. They recommend putting the money you would spend on one in a savings account to cover repairs. Interestingly, however, one of the experts heartily recommends offering a warranty with a house you’re selling. He cites a study showing houses with a warranty sell faster and for more money
The former Commissioner of the Tennessee Department of Commerce & Insurance said, “Home warranties can be a financial asset if an expensive appliance needs repairs, but they can also be confusing for prospective buyers. We encourage consumers who are in the market for a home warranty to research the company, read the full statement of coverage, and compare warranties before selecting the one that is right for them.”
Researching the company should include checking out its record with the BBB.