Is a home warranty company right for me?

After 20 plus years in the HVAC and Plumbing home service business we have seen many home warranty companies come and go. The good ones are still around and provide a valuable product for the homeowner. Many have gone out of business for a couple of reasons. The unsuccessful ones usually had a history of misrepresenting their product to both the homeowner and the contractor performing the work for them. They treated the homeowner like a nuisance not a valued client.

Home warranties are essentially insurance for the appliances and other components of your home. Those appliances and components covered vary by policy just like any other insurance policy. So do copays, deductibles, and limits on payouts. Make sure you read the limitations of your policy before you accept. Also check out the carriers online reputation. Not all insurance companies are alike even if they offer the same coverage.

Home warranty policies are much like health insurance for your home and they most resemble an HMO plan. When something fails or needs repair in your home and is covered by your HW policy, you contact the carrier and they direct you to their preferred provider. An independent contractor that works for the carrier. Just like the HMO you must see a doctor that is part of their HMO network. That contractor will diagnose your problem and then contact the carrier and speak to a company representative to get authorization for the repair or replacement. This representative is naturally looking for the most economical and efficient solution. Sometimes this is just a band-aid as opposed to a long-term fix. Makes sense, it is just good business sense to save their company money. The less reputable carriers just take the cheapest route without regard to what is best for the homeowner. The top carriers work with the homeowner and the contractor to arrive at the best solution for all parties with a focus on the homeowner.

Many contractors choose not to represent home warranty companies because when the carrier/homeowner relationship goes sour the contractor gets caught in the middle and gets the negative reviews. We have interviewed with a couple of national home warranty companies that did not have a pay scale that worked for us and they told us not to worry that they would show us how to make our profit off the customer with fees and upcharges. We found this deceptive and outside of our company core values so we have opted out but there are many good contractors that have found a good group of carriers that share their core values and they choose to work with. We recommend you ask the HW for a list of contractors they use in your area. Do your own research.

Who are the good home warranty companies?

After 20 years only one has stood out as a consistent value according to our clients and their online reputation. American Home Shield was one of the originals and has consistently been recognized as a market leader and is respected by both the client and the contractor. Operating under a slightly different concept than the traditional home warranty is America’s Preferred Home Warranty (APHW). The main difference is they allow you to use your own contractor instead of one of theirs. That is nice since the contractors on many HWs lists are often unvetted by the HW and you may not get the service professional you expect.

Here is a list of Pros and Cons of investing in a Home Warranty

Pros

Repairs paid for with a simple copay or deductible.
Contractor (repairman) is contacted and scheduled for you.
Good HWs will replace the appliance when it makes more sense than repairing or at least give you an allowance or buy-out.
If the warranty came with the real estate transaction, then you got it free (well kinda) and it can save you a lot of money and stress over finding a repair solution on your own.

Cons

Many appliances are not covered if not properly maintained by a licensed professional. That is in the fine print and is their out when the repair or replacement is too high in their estimation. We see this a lot.
Long waits for emergency service. If your water heater or AC fails, you want it fixed right away. The contractors the HWs use are often small if not one truck operations and already booked with calls from customers paying full price, not a $50 copay. Who do you think gets priority. We have gone on many service calls where the customer called us after waiting weeks for the home warranty contractor.
Often the contractors are small, understaffed and not properly trained. We often go in behind these contractors for a second opinion only to find out they have misdiagnosed the problem.
Hidden fees. This is exactly how we were told by one HW to build in revenue. Diagnose a failed, leaking evaporator coil. The HW will pay for the new coil and pay us a small labor allowance. They suggested that we charge the customer for; disposal of the old coil $200- $300, refrigerant recovery $200, code upgrades $100. What the customer thought was a $50 copay now is over $600 out of pocket.
Caps on claims. May not cover the full price of your repairs
Failure to schedule your service. We have had our customers tell us they waited days for the contractor to show up only to find out the HW failed to contact one.

Do Some Research

This is not an endorsement or an indictment of home warranties. It is a suggestion that you do your research of the HW before signing a contract. Make sure they cover what you are most interested in, verify copays, deductibles, and limits. Find out if you will be able to use your own contractor when you choose. Often times, as the buyer in a real estate transaction you get an HW from the seller. This usually turns out to be a HW the real estate agent for the seller has a relationship with. You do not have to accept this company. Ask for a copy of the policy before you get to closing so you can do your research and if you choose request a HW of your choosing.

Remember the two most expensive appliances, water heater and AC system require annual maintenance by a licensed professional for both the manufacturer’s warranty and the home warranty to be honored.