Not all home warranty service companies are alike and neither are their individual policies! If you are planning to purchase a home warranty agreement, it is extremely important that you compare the details of each policy and the reputation of the company offering the policy. Many basic policies do not cover what most consumers might expect.
The age of your house and its systems and appliances should also be considered. If a realtor offers to buy a home warranty policy to facilitate a sale, make sure that you, as the new homeowner, understand the details of the specific policy. Too many people have learned that unless a policy has added extra coverages for plumbing, heating /air conditioning, appliances, etc., very little may be covered in just the basic policy. These “plus” coverages can double the policy cost.
How do you get the details of a policy before you buy? You may mistakenly think researching a company’s website would reveal all that you need to know. You need to request that the policy be sent or e-mailed to you for your review. Look at the “Terms and Conditions” at the end of the policy. That is where you will find many disclaimers.
Listed below are just a few examples of what some companies do NOT cover in their basic policies.
The cost of permits and code requirements, although mandated by law, are not covered by many basic policies. Haul away and disposal fees are usually not covered by basic policies. These items may be covered up to a specified amount with plus or extra coverage upgrades. Many things are excluded even with premium coverages, so check the exclusions under each system carefully. All of these exclusions may leave the consumer paying substantial amounts.
Appliances- Any manufacturers’ warranties apply before your home warranty policy does. If your appliance needs to be replaced, it can be replaced, per some policies, with an unused but old model like the one it replaces (if one that old can be found). The new appliance does not have to match the dimensions, brand or color of the replaced appliance. This could cause real problems with existing cabinets, not to mention the aesthetics of a room. If an appliance needs a minor repair, your service fee to diagnose the problem could be more than the repair costs. There may be dollar limits for appliances and some types of appliances may be excluded due to their type or location within your property.
Plumbing- Basic policies with some companies do not cover faucets, toilets, shower heads, etc. Even with “supreme” or “premium” coverage, the dollar amounts allowed for replacements of faucets and toilets may be too low to cover the type or brand of faucets or toilets that you have in your home. Electrical- While electrical wiring is covered by basic agreements, premium extra cost policies may be required to cover light fixtures, garage doors, intercoms, etc.
Heating and Air Conditioning Systems- In states such as Florida, Kentucky, and many others, the law already requires that if one air conditioning component has to be replaced so does the second (the air handler and the condensing units). The Department of Energy 2015 HVAC Energy Standards are being adopted by more states now and will eventually save quadrillions of BTUs of energy. You may be responsible for thousands of dollars to pay for the second unit if only one unit has to be replaced.
Also, hundreds of dollars of the cost of replacing the damaged unit may not be covered. Permits and code requirements are not covered on many basic coverage policies. Unless you want an expensive surprise, make sure you understand exactly what your specific home warranty policy will cover in this important category. In addition, the covered systems and appliances must in good and safe working order at the start of the service agreement. If your home is larger than 5,000 square feet, you will need to ask for a special price quote. Find out what the maximum aggregate liability (payment) amount is per policy.
Beware! Some companies charge interest on policies that are paid by the month, even by credit or debit cards. Factor in the age and condition of your home.
Do you have a new home with systems and appliances still under builders’ or manufacturers’ warranties? Are your systems and appliances near their life cycle end? Before you buy a home warranty, check with local repair companies and contractors. Ask what their experience has been with specific home warranty companies. They may tell you which companies are difficult to work with and which honor their service report recommendations. Ask your friends for recommendations and check on line for reviews.
Most importantly, the consumer is responsible for understanding what the policy covers that they purchase. With potentially thousands of dollars in repairs not covered by many policies, make sure you have thoroughly researched both the company and the policy you select before you purchase it!