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Do I need to buy a home warranty?

Dave Judd on Jan 12, 2016

home-warranty
A recent survey stated that 2/3 of home buyers report the failure of two major items in their home within the first year of ownership.  This fact creates a slam dunk for companies offering home buyers a homeowner protection policy.  Typically purchased by the seller, home warranties offer the buyer ‘peace of mind’ protection for the failure of appliances and household systems.
The policies are relatively inexpensive, but there’s a catch.  Not all repairs are covered.  As a service provider who has worked for many home warranty companies, we’ve found the following to be true:

There are multiple levels of protection available, and most buyers are not aware what level they are getting.  Many assume they’re covered 100%, when that’s almost never true.  AND there is almost always a homeowner-paid deductible amount due at time of service.

We’ve found many buyers extremely upset with the service, response time, and lack of caring on the part of the warranty company.  Considering their business model, they make more money by not paying all or part of the ‘coverage’.

Oftentimes, in requesting authorization to proceed, service providers are interrogated intensely on recorded lines, and we’ve found the warranty company probing for reasons to not pay for repairs, based on how we describe the problem, or its origin.  Why a component failed might elicit a guess on our part, but given certain verbiage by us, coverage may be denied.  No service provider wants to be the cause of a coverage denial.  Nevertheless, it’s common for the warranty company to mandate a ‘second opinion’.  This means the homeowner needs to potentially take an additional day off work to meet another service company.  It should be obvious that this leaves the service provider AND the homeowner with a bitter taste.  We’ve been called back to do the work after a second opinion, since the second opinion was more expensive – meaning a third appointment for the homeowner.

It’s common for warranty companies to keep a service technician ‘on hold’ for 30 minutes or more, while we seek phone authorization to proceed.  Frequently the warranty company asks a question and then places the tech back ‘on hold’ three or more times.  We’ve been told arrogantly after long wait times, that they don’t pay for ‘on hold’ time.  Vendor contracts for service providers are complex and heavily laden with legalese, in favor of the warranty company.

Given that professional service companies are finding their margins eroded by this business model, more professionals are opting out of working for warranty companies.  Warranty company loyalty to a service company who has made them look very good, simply does not exist when a newer cheaper company becomes available.  Therefore, service vendors find their return on assets better utilized elsewhere.  Who are the service replacements?  Second tier providers who don’t offer full service and who provide less value and a less satisfactory experience to the customer.

Homeowners do have the right to ask who will be visiting their home, and to request time to check online reviews first.   If they are being serviced by lesser experienced lower value providers, the homeowner may have no say in who they will get, unless they ‘create a stink’ about it.  We have often been called in after the fact to correct poor quality work, or to cover after hours calls when the ‘discounters’ don’t offer full service 24 hour protection.

The service provider may recommend replacement of a tired component.  The warranty company might probe on whether there is any way to repair vs. replace, even a very old item just to get it past the coverage period.  There is no guarantee to the customer for replacement vs. repair.  However sometimes the company will allow the homeowner to pay the difference if they’d prefer replacement.

Homeowners should request a statement of the covered items in detail before closing, and ask specifically what is covered and what is excluded.  The next step would be to read online reviews of the warranty company based on others’ experiences, before proceeding.

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