Our house came with a homeowners’ warranty. The realtor we worked with, noting that our air conditioning unit was 18 years old, told us to make sure to keep up with the warranty because that would cover the cost of replacement on our central air unit.
At $650 a year, keeping up with the homeowners’ warranty to replace a $4,000 to $6,000 central air unit that was on its last legs sounded like a good deal.
Homeowners’ Warranties—Buyers Beware
Last year, one week into home ownership, our hot water heater died, and we got a glimpse of how the homeowners’ warranty worked.
We had to work with a specific company, I’ll call Company A, designated by the homeowners’ warranty, to replace the hot water heater. Company A asked me to call my home owner’s insurance to see if they would pay to have a different company, Company B, come clean up the water damage. (We had very little water damage, but Company A’s repair man assured me we’d get mold, even though we’re in Arizona with very little humidity.) Luckily, I didn’t do that because Company B wanted to charge us $1,000 to clean up the water.
Clearly, Companies A and B must have had kickbacks with one another for business referrals.
Also, I thought we’d only have to pay the $75 service fee to get our hot water heater replaced, and then the homeowners’ warranty would pay the rest.
Wrong.
We still had to pay $375 more for parts and repairs that weren’t covered under the homeowners’ warranty.
The homeowners’ warranty paid $650, so that year, despite the annoyance and out-of-pocket expenses for the hot water heater replacement, the policy paid for itself.
Homeowners’ Warranty Will Only Help If the Appliance Dies
This year, after much thought, especially considering the bad experience with the hot water heater, we decided to renew the policy. We paid another $650.
And then, our air conditioner started the march to a slow death.
First, it worked over time, running all the time, but it couldn’t seem to cool the house.
When our next electric bill came, it was $120 higher than usual.
But, the homeowners’ warranty wouldn’t pay anything for the air conditioner unless it was not working at all.
We called our own repair person and paid $200 to have two pounds of Freon replaced. Two months later, and the cycle is repeating itself. The air conditioner is working constantly, but the house is not cooling. I’m guessing we are already out of Freon.
Now, we’re faced with a choice. Wait for the unit to die so the homeowners’ warranty will cover the cost of the replacement, or replace it ourselves.
If we wait for the unit to die, the homeowners’ warranty may cover the majority of the cost, but we would have no say in the company doing the work or the replacement unit. Meanwhile, we will keep paying to replace Freon and having higher than usual electric bills until the unit dies.
Or, we could replace it ourselves and stop the flow of wasted cash and energy caused by the old air conditioner. We could choose the company we want to work with and what model we’d like as a replacement, the more energy efficient, the better.
While a homeowners’ warranty can save people money, in the long run, for us, it seems to be too much of a hassle and too restrictive to keep up with.
Do you have a homeowners’ warranty? If so, do you find it valuable?
Melissa is a writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking. She resides in New York, where she loves the natural beauty of the area.
We had one thrown in with our home purchase, and I never used it. We had our sump pump die, and I called, but because of the location of the sump pump (they built a little half wall around it due to it being in a finished area of the basement), they told me that they’d likely have to take down the wall…but assured me that they’d fix it how it was. Uh huh, right. I just hired someone I knew who was fine with working within the cramped space and saved myself a whole lot of time and aggravation.
I never pay for extended warranties. They seem to always cost more in either time or the cost of the policy than I recover from them. I watched my parents battle the home warranties twice as a kid and teen when we bought a new house. The work got done but it took so much longer, a ton of phone calls, and battles of getting them to do the work properly versus just giving it the old band-aid trick to hold the problem over.
I had some experience with homeowner’s warranties at my last rental. It was such a hassle to deal with the warranty company for any repair. It left such a bad taste in my mouth, I’ve never considered one since. I prefer the freedom of choosing my own repairman, my own replacement product, and doing it on my time, without the additional hassles of the insurance company.
I’m with you, Melissa…I think under most circumstances, the homeowner’s insurance is simply a profit center – for the insurance company! Between the cost of the policy, the deductible you must pay before insurance kicks in, the obligation to use ‘their’ service providers, and the myriad of exceptions to coverage, I’m afraid the consumer is not the winner!
Well geesh, that sucks. We do have a Homeowners Warranty, and we’ve had it for the past 5 years (the amount of time we’ve been homeowners). I will say that we’ve had to call them maybe 4 times, for our garbage disposal (2) and hot water heater (2). Both times we paid the $75 fee (that’s it) and they repaired the parts that needed to make the units function.
I was aware that they would pay for a replacement up to a certain point. This makes me want to review our warranty again though because we are paying about $500 a year for it. My husband wants to keep it, but I’m willing to save in other areas if their is no good return on investment. Thanks for sharing your story with us, I know it will help many!
We have had a homeowners warranty totally pay for itself as well. The times it has saved us from completely paying for a new appliance out of pocket has made it worth the cost. We just had our A/C unit replaced after it died during a heat wave, and there’s no way we could have replaced that 100% on our own, without saving up for a few weeks.
“Like you, we quickly decided the warranty wasn’t worth it. Ours was about $500. We had numerous problems with an old furnace. As a result, we had a number of $75 visits. All each repairman did was kick the can down the road on eventually replacing the furnace — the repairmen even said as much. The cost of the warranty went up to $650 next year, so we used that as a down payment on a new furnace.
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