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Home Warranty Overview - A Homeowner



The other day Home Warranty plans jumped back on my radar. I was going over my savings plan for some of the major repairs around my house and my 10 year timeline with a friend. "You should just get a Home Warranty and save the headache". I'm a reasonable guy so combined with my previous knowledge and studies I took a deep dive into Home Warranties to find out if they're really worth it.


The Savings

The idea behind a home warranty is that you pay money in over time and whenever issues come up with your appliances or home the warranty should just cover it and everybody is happy. On top of paying $50 per month on average for a plan you're also expected to cover the first $75-$100 of each repair that's made depending on the service you use. 

Home warranty companies will always force you to try to repair something multiple times before they'll let you file a claim for a replacement. My HVAC guy charges $89 to visit my property. You pay the first $75 and the home warranty will happily pick up the the extra $14. Now any extra parts required for the repair they will cover for you if they can't prove it was caused due to neglect. 


Will the Home Warranty pay their dues?

Through my online searching and personal experiences/talking to sales reps it takes an amazing amount of energy to find a Home Warranty that will do anything at all for you. From my calculations if you save $150 per month over the life time of your appliances you should have no issues replacing any items as they come up broken or need repairs. You would think paying more than 1/3 of that amount to a Home Warranty should be more than enough to cover the basics.

Long story short, in my opinion home warranties don't pay. Through my search I was looking for a company to service the low country. My HVAC guy said rust is extremely common in an AC unit around these parts due to the extra salt in the air and all the rain we get keeping it moist and humid. Half of the "limitations and exclusions" I read said rust is a deal breaker, dead stop, do not pass go. They will not cover your system if you have rust.

Let's say you make it through all this and actually get a claim filed for replacement. Your stressed out, your family is stressed now. Now the company comes back and denies your initial claim. You've paid this company $50 per month for the past 3 years without fail thinking they would back you up in a situation like this. They owe you $1,800 at least on your $500 stove purchase and your claim has been denied. 

You research around and find out you need to get copies of the maintenance and repair schedule as well as the invoices for qualifying repairs since you bought the machine. You dig through files and call different companies gathering paperwork for more than a week to get your claim resubmitted. That magical day comes and you get that email, "Accepted!". You jump up and to the victory you've just won yourself in life, Congratulations! You open up the email to confirm the details before picking our your brand new range to see "replacement cost valuation $275"....What gives? Home warranties aren't required to give you the biggest, nicest item off the shelf or even pay you enough to get a new appliance. They're only responsible for the DEPRECIATED value of the item you've filed a claim against. Obviously it's 10 years old and currently in disrepair, so you're getting slightly more than scrap yard cost, but they finally paid out. 


The Solution

Nobody is going to take better care of you than yourself. There's no doubt about that. Now here you asking, "Should I get a home warranty?". Short answer, no. In my opinion you should take that $50 per month and put that into an Appliance repair savings account. If you can manage it I recommend putting in at least $100 per month to give you complete peace of mind. The average lifespan of your small appliances is around 10-15 years. $100 per month for that time is $12,000 - $18,000. That can go a long way to cover all kitchen appliances ($4,000), washer/dryer ($1,000), furnace ($4,000), water heater ($2,500), and put a good dent in an AC unit replacement ($6,000). Now if we're being realistic that should more than cover all of these appliances depending on the age due to the fact that they won't all go out at the same time, but most of these companies also offer short term financing for any fees left over.


Conclusion

At the end of the day you need to be the one to make the most informed decision for you. If you've got the fight in you to put up with another company trying to get your money or you know your appliances won't make it another 3-4 years then it might be something you should consider further. It'll always be better and more budget friendly to put aside your own funds for major purchases as everybody else just wants their piece of your pie. They're a business after all and the primary goal will be to make them money. Whatever your choice is, be confident in your decision and Happy Spending!

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