Having a nicely set up home means having a lot of fancy gadgets and appliances as well as sophisticated systems to keep it running. But you should never forget that no matter how fancy those devices are, they can (and will) break down eventually.
The question here is whether you should pay out of pocket for what can be quite expensive repairs or do you buy a home warranty plan that will reduce those expenses?
Benefits, limitations, and costs of a home warranty plan
Home warranties are plans that aim to protect homeowners in case some of their home systems or appliances break down. If this happens, the warranty provider will cover the repair or replacement costs. For that you’ll need to pay an annual fee of about $400-600 on average.
Home warranty plans are usually divided into Basic and Premium with a variety of options items to add to either coverage. The Basic plan covers the most essential appliances, such as the fridge, washer, dryer, heater, and dishwasher. Premium and Optional plans can extend to cover a variety of home systems and appliances up to and including vents, spas, hot tubs, pools, and AC systems.
That’s the theory, but in practice home warranty plans aren’t that straightforward. In this regard they are similar to home insurance, as both plans have a large number of clauses that address things like which parts of the appliance and what types of breakdowns are covered. Some of these plans might also cover repairs but not replacements or exclude replacements of the “weakest” parts of the device. Incidentally, those are the parts that break down most often.
Taking these details into consideration, you should be able to understand that while home warranties can be a good type of protection, they can also be a waste of money. The difference often boils down to how good a provider and how comprehensive a plan you choose for protecting your fancy home.
And investing in a home warranty plan is a tempting idea because if you choose well, you will be able to get a chance to reduce your appliance repair costs significantly. For a home full of expensive devices, this can be a huge benefit.
The problem, however, is to determine which of the many home warranty providers can be trusted. This industry is growing fast today and it already values at $2.3 billion with about 200 companies offering this kind of service.
Choosing a home warranty provider you can trust
To choose between the many available offers you’ll need to focus on studying the company’s reputation first. But be advised that this won’t make your choice easy because quite a few of the leading companies were involved in some sorts of scandals.
Unfortunately, in the world of tabloid press and sensationalism, bad news sell better. Therefore, you can see even the names of the biggest companies in the industry tied to some infamous incidents, like that matter with AHS and Wells Fargo.
You definitely shouldn’t fall for sensationalized stories and instead do some independent research. But be advised that focusing on the biggest names in the industry isn’t a viable plan here because it’s extremely unbalanced. Over 42% of all home warranty coverage in the US belongs to AHS, according to Statista. And less than ten companies, alongside AHS claim 77% of the industry.
This means that over 150 businesses share the remaining 23% of contracts. Their names might not be as widespread, but doing research will show that they are popular in the right circles. For example, Select is one of the better known names in the business as the company covers nearly all of the US. The reason why this company and some of the businesses in a similar position, isn’t in those top ten is that it has only been around since 2012. This industry has been rather slow to innovate, so younger businesses are often treated with wariness.
Falling for that might be another mistake because it’s often the younger companies that understand that the needs of homeowners today are different from those in the 1960s. They create plans to reflect that, which means they might be a better fit for your fancy gadget-packed home.
However, you shouldn’t forget that many home warranty providers have loopholes in their contracts that might make them useless for homeowners. For example, what’s the point of paying for a plan that will only cover repairs under $100 considering that the average cost of appliance repair is considerably higher than that?
To avoid problems like this, when shopping for a home warranty plan you need to pay attention to the following:
- Replacement limits.
As replacement is the most expensive part of repair, you need to be sure that this plan will cover this cost fully.
The best plans do not only cover the largest number of systems and appliances but also have a long list of covered breakdowns and damage types. All in all, research what’s most likely to go wrong with all your devices and make sure that the plan will cover all of it.
- Reaction time.
One of the benefits of using a home warranty is that the provider will be tasked with finding all repair contractors for any system or appliance and sending them your way. But you need to be sure that they will do so promptly so you don’t sit around with a broken fridge for weeks.
- Claim filing terms.
Study the contract and see if the claim filing terms are sensible. Some companies will limit you to filing the claim on the same day or add some other ridiculous requirements that only aim to help the company avoid honoring the contract. Read the fine print and always stay alert for any trickery.
The best home warranty plan will have reasonable terms and conditions, extensive coverage and payout limits that make purchasing it actually worth it. You’ll need to take your time studying all contracts on offer, but this is necessary to be sure that you won’t be tricked when a breakdown happens.
Most importantly, you need to make the effort of researching the company’s reputation. Study independent professional reviews as well as customer reviews and complaints filed on the BBB website. Home warranty providers will never have an impeccable reputation, but all these sources will help you form an objective opinion about the company’s trustworthiness.