Home warranty - is it worth the money?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
Post Reply
Topic Author
JackRam
Posts: 1
Joined: Sat May 04, 2019 9:20 am

Home warranty - is it worth the money?

Post by JackRam » Mon May 13, 2019 9:59 pm

I live in a 15 year old home with every appliance and systems original from builder. I recently had a blown out motor in HVAC that cost about $300 to fix though it could have been worse.

Now I am thinking if I should buy a home warranty. Your thoughts?

tim1999
Posts: 3600
Joined: Tue Dec 16, 2008 7:16 am

Re: Home warranty - is it worth the money?

Post by tim1999 » Mon May 13, 2019 10:15 pm

The last house I bought had one included from a national warranty company that was paid for by the seller, which was a common thing to include in a house sale in that particular area.

The biggest benefit for me was that when something went wrong, no matter what it was, I just had to make one call to the warranty company and they scheduled an appropriate contractor to come out. Almost always within 48 hours even if a not very urgent issue, and the appointment window times were pretty flexible. I didn't have to mess around with trying to find a legit contractor interested in a small job, having them come to give a price and hopefully show up, not overcharge me, etc. The warranty farmed most of the work out to small, but incorporated "handyman" type contractors.

Most of my problems in that particular house ended up being related to various plumbing leaks, and one HVAC issue. The problems were always fixed without the warranty company balking at anything.

User avatar
baconavocado
Posts: 294
Joined: Fri Oct 13, 2017 3:03 pm

Re: Home warranty - is it worth the money?

Post by baconavocado » Mon May 13, 2019 10:18 pm

No.

You can search this topic on the board to find out why. In summary, home warranties are a rip-off. They don't cover things that commonly break, and when they do cover it, they aren't going to repair it when it breaks (e.g., weekends, evenings, etc.).

These things are about as valuable as extended warranties on appliances, electronics, and everything else. I think they were dreamed up by the real estate industry as another profit generator.

adamthesmythe
Posts: 2834
Joined: Mon Sep 22, 2014 4:47 pm

Re: Home warranty - is it worth the money?

Post by adamthesmythe » Mon May 13, 2019 10:24 pm

Buy a warranty if (1) your budget is very tight and you have minimal emergency fund (2) you can be patient and persistent to get things fixed (3) you are sure that the most important items are covered and (4) you are OK with cheap fixes that may need to be redone more than once.

The age of the house or appliance alone is not a good predictor of probable failure. Refrigerators, unlike the items inside, do not come with "sell before" dates. At 15 years you are in the low part of the bathtub curve for many appliances.

I don't gamble in Vegas. But I do believe skipping most extended warranties is a good bet.

Big Dog
Posts: 1184
Joined: Mon Sep 07, 2015 4:12 pm

Re: Home warranty - is it worth the money?

Post by Big Dog » Mon May 13, 2019 10:30 pm

instead of a warranty company, much better to establish a relationship with a good plumber and HVAC guy. The Warranty companies hire a lot of inexperienced rookies.....

User avatar
HueyLD
Posts: 6926
Joined: Mon Jan 14, 2008 10:30 am

Re: Home warranty - is it worth the money?

Post by HueyLD » Mon May 13, 2019 10:41 pm

I heard many stories about home warranty services. And the general theme is that insurance companies make lots of money by trip charges ($75 per service call) and denial of services by exclusions in the fine print that nobody bothers to read.

Some homeowners were lucky to have one good experience, but many seem to have subpar experience because the contractors always take a few trips @$75 each to attempt to fix a problem and it appears that quality folks don't work for peanuts paid by the insurance companies.

I think the better alternative is to set aside 1% of house value per year as house maintenance reserve.
Last edited by HueyLD on Mon May 13, 2019 11:48 pm, edited 2 times in total.

boglerdude
Posts: 744
Joined: Fri Jul 10, 2015 1:28 am

Re: Home warranty - is it worth the money?

Post by boglerdude » Mon May 13, 2019 11:12 pm

Warranties do cheap work. Search for repairmen on Nextdoor.com

User avatar
FIREchief
Posts: 3170
Joined: Fri Aug 19, 2016 6:40 pm

Re: Home warranty - is it worth the money?

Post by FIREchief » Tue May 14, 2019 12:30 am

Way back when I owned a house (i.e. 14 days ago), I only utilized competent contractors. I'm in a medium sized metropolitan area. My HVAC contractor was in business since 1947. My plumbing contractor since 1950. Appliance company since sometime in the 50's. I don't believe that any of these participate in the scam that is home warranties.

Our home buyers requested a home warranty and we negotiated it into the final deal. Best of luck to them..... :beer
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

User avatar
Meaty
Posts: 680
Joined: Mon Jul 22, 2013 7:35 pm
Location: Texas

Re: Home warranty - is it worth the money?

Post by Meaty » Tue May 14, 2019 5:26 am

They aren’t worth the paper they are printed on. Getting a claim paid is incredibly difficult
"Discipline equals Freedom" - Jocko Willink

SimonJester
Posts: 1912
Joined: Tue Aug 16, 2011 12:39 pm

Re: Home warranty - is it worth the money?

Post by SimonJester » Tue May 14, 2019 8:23 am

They are by far Worthless... Take the money you are going to spend on that warranty and put it into a savings account...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

megabad
Posts: 1808
Joined: Fri Jun 01, 2018 4:00 pm

Re: Home warranty - is it worth the money?

Post by megabad » Tue May 14, 2019 8:35 am

Sure they are worth it when you are selling a home and it makes an inexperienced buyer feel better and gets the sale done. By definition, for most people they are almost always a money loser though.

scophreak
Posts: 32
Joined: Tue Jan 12, 2016 1:17 pm

Re: Home warranty - is it worth the money?

Post by scophreak » Tue May 14, 2019 8:50 am

I had a 1-year policy included in the purchase of my home (not something that we specifically requested or asked for). We did use it for 2-3 minor claims within that year with no issues whatsoever - garbage disposal replacement, sump pump replacement, and one other that I can't specifically recall. All problems were fixed with a single service call charge and we haven't had any repeat issues with the same components.

That said, I'm not sure that the warranty would have been "worth it" had we purchased separately. I suppose we may have "paid" for the service since it was rolled into the purchase - perhaps there was some additional negotiation room had we declined. Probably ended up as approximately a wash for us, though we may have come out a couple hundred $ in the black.

User avatar
queso
Posts: 710
Joined: Thu Jan 07, 2016 3:52 pm

Re: Home warranty - is it worth the money?

Post by queso » Tue May 14, 2019 11:47 am

Had one on my first house - American Home Shield or something I think. Anyway, tried to use it once for a cracked toilet tank. They didn't want to buy and install a new tank that matched the base and pedestal sink since it was cheaper to buy a builder grade toilet and just install that. Ended up buying the tank online and replacing it myself. Never called them again.

ajg189
Posts: 9
Joined: Tue Mar 26, 2019 3:11 pm

Re: Home warranty - is it worth the money?

Post by ajg189 » Tue May 14, 2019 1:11 pm

I may be in the minority here, but I had a home warranty included with the purchase of my home. Last year, after being unable to fix our dishwasher (two service calls over an approx. 2 week period), they cut us a check for a new one including install/disposal costs. My appliances are all 10+ years old, so I extended it knowing that we will have some repairs coming up on the horizon.

thx1138
Posts: 944
Joined: Fri Jul 12, 2013 2:14 pm

Re: Home warranty - is it worth the money?

Post by thx1138 » Tue May 14, 2019 1:18 pm

In general no. Most "warranties" and "insurance" are of course a money loser to the purchaser in the long run. Buy only insurance that covers things you can't realistically cover yourself (e.g. catastrophic health, various forms of liability). A home warranty is more cost effectively handled by an emergency fund.

Where they are useful is where you want to transfer - usually temporarily - the liability for getting things fixed to a third party. The most common case being on a home sale where the seller buys a year warranty for the buyer so they don't have to get into endless fights about the condition of appliances and other systems in the house.

Another case in which we actually paid for a home warranty was when we temporarily rented a property while we were out of town. We wanted the tenants to be able to contact someone other than us if a repair came up and not have to pay anything out of pocket themselves. If we actually ran lots of rental properties presumably we'd use a management firm or develop other long term relationships in an area to handle these things but since it was only for a year the most cost effective way to do it was via a home warranty.

It did fulfill the intended role but we were pretty unimpressed. When an HVAC issue came up instead of dispatching the most reputable and largest firm in the area (which had actually installed it) they sent out someone else who in the end couldn't tackle the particular issue so then they had to send out someone else. Both visits incurred the $75 fee and of course then my tenant had to be on site twice instead of once.

I'd never pay for a home warranty myself on a house that I occupy myself for the long term.

3funder
Posts: 1007
Joined: Sun Oct 15, 2017 9:35 pm

Re: Home warranty - is it worth the money?

Post by 3funder » Tue May 14, 2019 1:20 pm

Nope.

User avatar
mhadden1
Posts: 695
Joined: Tue Mar 25, 2014 8:14 pm
Location: North Alabama

Re: Home warranty - is it worth the money?

Post by mhadden1 » Tue May 14, 2019 1:43 pm

ajg189 wrote:
Tue May 14, 2019 1:11 pm
I may be in the minority here, but I had a home warranty included with the purchase of my home. Last year, after being unable to fix our dishwasher (two service calls over an approx. 2 week period), they cut us a check for a new one including install/disposal costs. My appliances are all 10+ years old, so I extended it knowing that we will have some repairs coming up on the horizon.
I too had a home warranty that the seller paid for, as a marketing tool, when I bought my house. It paid for some things that broke, so it ended up having value for me. I think these warranties are pretty expensive and not likely to be cost-effective - I can't see myself ever buying one.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

3feetpete
Posts: 361
Joined: Sun Dec 14, 2014 7:30 pm

Re: Home warranty - is it worth the money?

Post by 3feetpete » Tue May 14, 2019 2:30 pm

I had one that came with my current house. The gas furnace failed and they replaced it although I had to wait a few days for it to ship to a local installer. It still cost me a few hundred dollars for stuff that wasn't covered. There was a deductible and haul away charge and an extra for modifying the ductwork. I was not dissatisfied with the experience but I didn't renew because they give me no option to upgrade to a better quitter more efficient unit. They replaced the contractors model with a similar contractors model and that was it. If I wanted to upgrade they would only give me $200 towards a unit for me to get myself.

daheld
Posts: 526
Joined: Wed Sep 13, 2017 8:14 am

Re: Home warranty - is it worth the money?

Post by daheld » Tue May 14, 2019 3:10 pm

I too didn't protest when the seller of our home included one. We did not ask for one, but I just accepted the 1 year warranty as part of the sale.

I wish I'd just asked for a $450 credit. I'd regale you the tale of trying to submit a claim, but I'm pretty sure there's a character limit on these posts, and I'd probably get banned for profanity.

User avatar
FIREchief
Posts: 3170
Joined: Fri Aug 19, 2016 6:40 pm

Re: Home warranty - is it worth the money?

Post by FIREchief » Tue May 14, 2019 3:40 pm

daheld wrote:
Tue May 14, 2019 3:10 pm
I wish I'd just asked for a $450 credit. I'd regale you the tale of trying to submit a claim, but I'm pretty sure there's a character limit on these posts, and I'd probably get banned for profanity.
LOL!! :beer I think I paid $515 for the one that my home buyers asked for. It didn't cover pre-existing conditions, and I'm pretty sure it's up to the buyers to "prove" to the warranty company that the <fill in the blank> that just failed wasn't in poor condition when they bought the house. I also read some on line reviews that were pretty scathing. Warranty company only uses a single HVAC contractor (likely the low bidder) in town and there were reports of warranty owners being without AC for several months during the summer. Some just gave up and paid a "real" contractor to get their AC going again.

I'm am little surprised that most Bogleheads in this thread have essentially answered "no" to the OP's question.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

hookemhorns
Posts: 77
Joined: Sat Jul 09, 2016 11:16 pm

Re: Home warranty - is it worth the money?

Post by hookemhorns » Tue May 14, 2019 8:33 pm

They’re a rip off. You’re better off pocketing the premium and hiring quality repair services of your choosing, assuming you even need them.

The catches to home warranties are:

1) They charge a per visit deductible and repairs are often split over multiple trips (ie fixing an ac requires one trip for diagnosis, second for parts and actual repair) leaving you paying most of the cost out of pocket.

2) They choose the repair service, which means you get the cheapest and least experienced service. Again requiring more trips to actually fix the problem.

3) They select the appliance you get if something needs replacement. You will get the cheapest POS they can find.

4) The policy has many exclusions and fine details. For example, if your ac goes out they ask to see your maintenance records, even if you just bought the house. Don’t have them? Sorry, it’s not covered.

On and on. It’s a rip off.

tampaite
Posts: 569
Joined: Wed Feb 18, 2015 9:29 pm

Re: Home warranty - is it worth the money?

Post by tampaite » Wed May 15, 2019 10:11 am

Deleting my messages on this forum
Last edited by tampaite on Mon Jun 03, 2019 7:22 am, edited 1 time in total.

User avatar
cheese_breath
Posts: 8620
Joined: Wed Sep 14, 2011 7:08 pm

Re: Home warranty - is it worth the money?

Post by cheese_breath » Wed May 15, 2019 10:12 am

You only spent $300, and you're thinking abut buying a home warranty? When you buy a house you should set up a budget which would cover normal maintenance items like this.
The surest way to know the future is when it becomes the past.

GT99
Posts: 211
Joined: Wed Jun 20, 2018 5:26 pm

Re: Home warranty - is it worth the money?

Post by GT99 » Wed May 15, 2019 10:51 am

Absolutely not. A home warranty is insurance for things breaking in your home. You should only insure for things you can't afford to happen (e.g. house fire, and other type things that aren't covered by home warranty). For things you can afford, the odds are very high that the insurance will cost you more than the occurrence - that's how insurance companies make money. Let's frame it a little differently - would you pay $500 a year to insure against something that there's a 10% likelihood of happening and it will cost you $2500 to fix yourself? I hope not.

To be blunt, if you can't afford the kind of repairs a home warranty covers, you can't afford to own a home.

On top of that, the Home Warranty company has little incentive to send high quality repair people. They are always going to send the cheapest. My first home purchase came with a home warranty, and I didn't know better. I ended up with years of HVAC issues because the company they sent was completely incompetent. Long story, but when I finally paid to bring in a company of my choosing (which I should have done long before I did) they were flabbergasted at the things the prior company had done.

Finally, they give themselves all kinds of outs on having to pay for a repair - if you didn't follow every manufacturer prescribed maintenance step exactly, they don't have to pay. And most people do not.

Post Reply