Home warranties, which have been around for years, originally gained popularity
with real estate companies which used them to promote listing services. They promised
that warranties would attract buyers and the seller would be protected from repercussions
if appliances or systems broke in the days or weeks after closing. Agents also
found that
home warranties saved occasional sales when they purchased
them for buyers spooked by an unfavorable home inspection.
Buyers appreciated the home warranty and they did offer protection to the seller
from some post-sale problems, but they probably weren't a major factor in choosing
a house or an agent. The early home warranty was also limited in coverage and
loaded with restrictions and exclusions. For many years they were a niche product
primarily associated with the buying and selling of property.
Now home warranties are bursting out all over, and marketing is no longer targeted
to the home seller. Warranties are available for purchase at closing from real
estate companies, whether or not they listed the purchased property. Agents
are giving one year policies as housewarming gifts to high
end buyers. Notably, agents, now familiar with the product, are buying them
to cover their own homes. Home warranties are available to everyone and they
may be an idea worth considering regardless of the age and condition of your
house.
As an example of the current marketing push, Washington Mutual Home Mortgage
(a mortgage servicer) is offering its customers the chance to enroll in a home
warranty program from American Home Shield. For $27 per month, payable with
the monthly mortgage payment, a homeowner can insure his home
heating system or heat pump, plumbing and electrical systems (including plumbing
stoppages), water heater, dishwasher, ceiling and exhaust fans and more than
a half dozen appliances or house components. For another $11 per month the coverage
will embrace central air, washer and dryer, refrigerator, and garage door opener
Other amenities such as a pool or spa or a well pump can be covered for additional
premiums.
When a covered problem crops up, the homeowner does not call his regular service
provider but the home warranty company (American Home Shield claims that service
calls are received 24/7) which then refers the call to one of its certified
contractors. A service call through American Home Shield is $45, paid by the
homeowner; anything additional is covered by the warranty, including replacement
of the appliance or system. (Lots of * and s.
Check out the availability of service. One company we contacted offered
no warranty at all in our semi-rural area but others may not be able to deliver
truly full service. Ask a customer service representative if there are holes
in their service availability or slow response time for certain repairs. If
they lack a certified technician for a certain problem will you be permitted
to contact an uncertified local tradesman?
Is it possible to finance the premium on a monthly or quarterly basis
or must the entire year's premium be paid up front?
Finally, do an analysis of your appliances and your own attitude in these matters.
With a bunch of ten year old appliances (except for the forty year-old dishwasher,)
taking out a home warranty, particularly one that could be paid monthly, was
a no-brainer. I might not benefit this year or next, but eventually I will be
glad I splurged. As with any insurance policy you are playing the odds. Just
ask yourself if you will be able to handle paying out $350 per year for five
years with only a few covered service calls along the way or if you might be
better off putting the premium each year into a special bank account for appliance
emergencies.