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Read the fine print: What consumers need to know about home warranties

It’s every homeowner’s nightmare: something is broken and it’s going to be very expensive to repair or replace. Unfortunately, no matter how well you take care of your home, sooner or later a major appliance or system is doomed to croak.

Some homeowners provide for this by purchasing a home warranty, which may cover some costs associated with the normal wear and tear of these units. But before you commit, make sure you understand what the warranty offers.

For example, even nationally recognized home warranty companies will not necessarily guarantee that a replacement item will be the same size, color or brand as its predecessor.

In a complaint to Consumer Affairs, a website that provides news and reviews to consumers, an outraged homeowner included a photo of her replacement white refrigerator that was too large to fit under the cabinets in the space where it sits. found the old one. According to the complaint, the owner had waited a month to receive the replacement of her black refrigerator and only kept the oversized white one after the warranty company said that “restocking and freight charges” would be required. send it back.

While this is not all customers’ experience with residential warranties, those who don’t read the fine print of their contracts might be disappointed.

In today’s bustling housing market, with some buyers forgoing home inspections and stretching their finances to make a higher bid, the promise of home repair discounts can be understandably appealing. But while home warranties have their perks, homeowners need to know that they can’t buy complete peace of mind for the price of a contract.

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Know what you’re paying for

A residential warranty is an optional policy for homeowners that covers the cost of repairs to devices and systems that have problems. Annual costs can vary widely depending on the policy, with premiums ranging from $ 300 to around $ 1,000.

In addition to the annual premiums, if you file a claim, you will also have to pay a service charge for a technician (chosen by the residential warranty company) to come to your home and assess the problem, even if the warranty company ultimately rejects your request. Again, the price will depend on your policy; fees typically range from $ 75 to $ 150 per visit.

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According to the National Home Service Contract Association, a Kansas-based industry trade organization, residential warranties typically cover costs related to “normal wear and tear” of systems and appliances such as indoor plumbing, heating, electricity. , the dishwasher and the oven. While some consumers might expect main units like central air conditioning, refrigerator, washer, and dryer to be covered by a basic plan, these may require additional coverage.

In addition, claims related to “pre-existing conditions” (problems prior to the purchase of the warranty) and damage caused by improper maintenance or use are likely to be refused by the warranty company.

“My number one tip is to maintain your home,” says Art Chartrand, former NHSCA general manager. While warranty companies tend to take a reasonable approach, he says, the homeowner is ultimately responsible for keeping their home in good repair. If you are a technician and “walk into someone’s house and find that they don’t know what an air filter is and haven’t changed it in years, it may be a problem. problem “.

Research the history of the company to get a more complete picture

While you can start your home warranty research on company websites and the best listings, those won’t tell the whole story of what it’s like to use your coverage. Since some warranty companies have a better history than others, you can get a better idea of ​​a company’s reputation by looking at sources such as government websites and customer reviews.

For example, a consumer alert from the Washington, DC office of Attorney General Karl A. Racine urges consumers to carefully read home warranty contracts. The disclaimer encourages consumers to know what the contract covers and does not cover, to be wary of exaggerated claims, and to seek more information about the company, preferably from someone who has worked with them before.

Over the years, state officials have also filed complaints against certain guarantee companies. For example, in 2014, the New Jersey Consumer Division filed a lawsuit against a large national home warranty company for denying claims by deceptive means.

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The company has been accused of blaming the malfunctions on poor maintenance “even when technicians said the covered household systems or appliances were properly maintained and / or failed for reasons unrelated to poor maintenance or service. pre-existing problems “. According to the complaint, a customer was told that her complaint about the air conditioner would be denied unless she could provide 12 years of service records.

Consumer reviews, your state attorney general’s website, and sites like the Better Business Bureau can all be valuable resources for researching a home warranty company’s history and distinguishing those with reputations and claims. positive track record of their clients. The Better Business Bureau alone lists 85 home warranty companies with “A” or better ratings, which could be a great place to start your research.

Find out when exactly your coverage begins

Jessica Hoff, broker-owner of Century 21 JRS Realty in Clark, New Jersey, has seen mixed results for her clients with in-home guarantees.

“On the one hand, there was a client who had a problem with a broken toilet on a Friday,” she says. “They called the home warranty company over the weekend and someone was there on Monday. It was a $ 150 deductible, and they ended up doing it all. It was a really positive experience.

Meanwhile, another customer killed the central air conditioning three days after shutdown, but the company refused to cover any claims for the first 30 days. “It’s 100 degrees in New Jersey,” Hoff recalls. “It’s midsummer, and he has to wait 30 days for the central air to be covered.”

It is quite common for home warranty companies to start covering 30 days after purchasing the contract. Although this is spelled out in the agreement, it is a detail that can easily be overlooked. Waiting 30 days for a new dishwasher can be inconvenient, but waiting that long for a working HVAC system could be more of a problem.

Read the fine print

Bigger items can have low coverage limits in some home warranty plans, leaving consumers to cover the rest of the bill. Kevin Brasler, editor of the nonprofit consumer review organization Consumers’ Checkbook, cites ovens as an example of an expensive unit to repair or replace, with many home warranty plans not covering only a fraction of the anticipated costs. “It’s not total protection,” he says, “and it’s not peace of mind for me. “

Several examples of contracts from major home warranty companies list a limit of $ 1,000 to $ 2,000 for work related to heating and air conditioning, when a new furnace or boiler can cost thousands of dollars more. So while consumers can save money with a home warranty, you should still expect to pay out of pocket when an important item needs replacing.

Additionally, Chartrand recommends that homeowners specifically inquire about any smart devices they own to understand the details of the coverage that may be available to them. As home warranty companies try to keep pace with technology, he says, there can always be a lag in coverage options for homeowners with newer smart devices.

How to get a better home warranty experience

“Before taking a break, take a look at your home warranty contract and familiarize yourself with it,” advises Chartrand. Consumers may leave money on the table simply because they forget or are unaware of the items that might be covered by their policy. Her advice for those who want to get the most out of their home warranty is to always check it before paying to replace something yourself.

“For example, a lot of people have coverage in these contracts for lighting fixtures and faucets,” he said. “Frankly, I forgot once. I had a broken faucet and went out to buy one and was like “wait a minute, my in-house warranty covers that!” “

Alternatives to home guarantees

Suppose you’d rather avoid going through the details of a residential warranty policy. In this case, you could take the money you would invest to buy a home warranty and put it in an emergency fund instead.

For example, let’s say you bought a home warranty plan that costs $ 50 per month and charges $ 150 for each service call. If your dishwasher were to be fixed after the second month, you would already pay at least $ 250 before it got fixed.

If the repair had cost $ 250 or less, that money might have been better placed in a savings account that you could have withdrawn by choosing your own preferred service company. However, suppose the dishwasher needs to be replaced. In that case, it could easily cost over $ 600 for a 24-inch unit – which could make the home warranty worth it (depending on when it broke and whether the replacement was covered by your plan).

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Another option is to consider adding “endorsements” to your home insurance. These can extend your coverage to cover electrical or mechanical damage to appliances, systems, and utility lines, although they probably don’t cover damage from normal wear and tear.

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Taylor Getler writes for NerdWallet. Email: [email protected]

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Rodney N.

The author Rodney N.