(Editor’s note: A few months ago, my Dad’s air conditioning unit stopped working. I thought he would be very worried about the expense as he is on a fixed income. Turns out he had a home warranty plan that covered the expense of repairing it, except for a small deductible. Since many of our readers are home owners or intend to buy a home after living in an apartment, it is worthwhile to know about home warranties just in case you need one down the road.)
How Do You Find the Best Home Warranty on the Market?
Home warranties are a form of insurance, but are nothing like home insurance. Confusing, I know. Put simply, home warranties are an insurance for the systems and appliances of your home, whilst home insurance covers the home and your personal belongings.
Your refrigerator is both an appliance and a personal belonging, so isn’t this overlapping? Well, the differences between the two also extend to what event it covers you from. If your home is broken into, or if there was a flood, your refrigerator would more than likely be covered with your home insurance, and not your home warranty. Whereas, if your refrigerator suddenly self-combusts and breaks just out of sheer wear and tear, then your home warranty likely has your back.
You can think of it as home insurance protects you from external events, tragedies, accidents and so on, whilst your home warranty protects you from things breaking down. Now it’s a bit more clear why home warranties are necessary, because these random breakdowns such as the HVAC system malfunctioning is far more likely an occurrence than a robbery or tornado (although, this does depend on where you live).
Not to say they’re mutually exclusive, though. Home insurance is vital and is usually mandatory by mortgage companies. Home warranties are just something slightly more optional, although it may end up being more useful.
Home Warranties: Notable companies and how they work
Home warranty companies essentially ask for a monthly premium, and in return they will cover you up to a certain amount, and only for certain events (i.e. if your A/C is maintained, it may not be covered). They will ask for an excess/deductible when you make a claim too, which might be around $60.
There are plenty of home warranty companies in North America. Whilst some are state-specific, here is a list of the most influential and largest ones:
- Select Home Warranty
- First American Home Warranty
- Amazon Home Warranty
- Choice Home Warranty
- Total Home Protection
However, even the largest of companies have received negative PR and online reviews. In this instance, Choice claims to not cover breakdowns relating to rust. This seems a little unfair, seeing as rust is a natural part of things getting old. So, not being covered for this, and not being covered for weather damages, accidents or burglary damages, it seems there’s less coverage that you would initially think.
All of these things, in conjunction with the different prices, policies and reputation make it very difficult to pin down the best companies. The next section will focus solely on how to pick out a good company, and how to spot the red flags of an untrustworthy company. At the end of the day, you’re going to want to settle for nothing less than the best home warranty provider, seeing as there’s so many scams and unreliable ones on the market.
How to pick a home warranty company
This is really the only problem you’ll run into with home warranties. Of course, with the wrong choice you could run into many more problems. You really don’t want to make the decision lightly, as the very point of this coverage will be to put your mind at rest, have quick and reliable repairs and to build a trusting relationship with the provider.
Contractual waiting periods
Most home warranty providers require a 30-day waiting list until the insurance is active. This is to ensure that you’re not signing up because you want an immediate claim for something that’s broken down. It is worth double checking the exact number, as some may be more/less than others. After all, you may decide it’s a good time to get a home warranty when some appliances start making funny noises and such, foreseeing a breakdown.
Taking your budget into account
Different companies have different premiums and deductibles. Generally, the more expensive premiums will land you with greater coverage and possibly service, but don’t rely on this indicator alone.
Be wary of anything that seems too cheap, and likewise, rule out the companies that don’t match your budget.
Matching value to coverage
There are two things to look at here. The first is what items and systems you have. Different companies provide different plans. Some will be blanket coverage for X amount of appliances, from which they’re already pre chosen, whilst some will afford you the freedom to pick exactly the appliances you have. It’s common that customers are covered by things they don’t even own in these large, generic plans, which will no doubt be reflected in the price of their monthly premiums. Also, keep in mind that most leisurely electronics aren’t covered, like TVs and phones.
Secondly, the value of your appliances and systems are important. Different companies offer different coverage limits. They’re typically between $1,000 and $2,500, although sometimes a single company will offer tiered pricing. This is where you need to assess the complexity and value of your stuff. If you’ve got high-end, complex German systems then you may find yourself not being fully covered as it’ll be expensive to fix. Likewise, you don’t want to pay for a high coverage of $2,500 if your possessions are old, cheap and falling to pieces.
Customer service is one of the most important factors in your decision. It’s not good being covered to the hill yet you can’t get hold of anyone or no one responds to your issue. Afterall, good customer service can only lead to more sales, which many are aware of.
It’s good practice to make sure that customer service is 24/7. Ideally, you’ll have just one hotline, as this is the easiest thing for most people. One number and you will be directed to the right department.
The small print is where much of the bad press comes from. Purposely complex and verbose terms and conditions is what tricks most people up. Be sure to stick with companies that keep the small print to a minimum and have nothing suspicious. You don’t have to be a legal expert to get the gist.
Lastly, assessing the aggregated online reviews as well as independent analysts’ views on the companies is a great final barometer of which way to go. By this point, you may have narrowed it down to just a couple, and this can be a great way to sift straight to the cold hard facts: how customers actually get treated and what the services is actually like.
Photo by Scott Webb