Home Warranty...?

22 Replies

A friend told me had his rental covered with a home warranty.  Is this worth it?  I wonder how responsive they would be.

My wife and I have one the we negotiated in to our personal home when buying it. If you know the right people (our realtor gets a discount) they only cost about $400-$500 a year and will come out and fix any appliance for about $75-$100 fee but will not replace them. we have used them once just because it was cheaper than paying a contractor to do it when our air handler went out. They were out to our house in about 1 1/2 days after we called and had it fixed the next day. I have never had it for a rental before though so I don't know if its worth the money.

Hi, Brad!

I work on the content development team for a home warranty company, and many homeowners and renters wonder if a home warranty is worth it. A home warranty can be very convenient when your appliances break down unexpectedly due to wear and tear. The two main reasons people purchase home warranties are for the piece of mind and savings in the event of a major repair. A home warranty company will be able to get a contractor to your property in a timely manner as long as your repair or replacement is covered in your warranty.

If you have any other questions, please let me know!

Whitney B.
Landmark Home Warranty

Hey Brad, 

I actually have a property right now that is under American Home Shield (AHS) home warranty. I'm currently out of state so I find it very convenient for me to be able to put the service request in online immediately after my tenant reports an issue, and they arrange for a reputable local company that they have a contract with to come out and assess the issue. Following that if any repairs are covered under the warranty, it is covered in it's entirety.

For example: My fridge breaks and my tenant calls me up and lets me know. I place a service request online, AHS emails me details and the company that is going to send someone out. That company will then contact you directly to set up an appointment.

One thing to note, as an "absentee" owner such as myself, I call up AHS after the appointment has been made but before the servicing takes place, and I pay upfront a $100 "service fee" with credit card. That way the tenant doesn't have to deal with it, just has to be at the house when they arrive. The person taking care of the issue will call you up and discuss any further repairs. This service fee is due for every service call you set up.

Pros: Relatively easy to use online service request, pay upfront and tenant gets it taken care of. If you have relatively expensive appliances that would be very detrimental to cover the cost of yourself if it were to break, this is a good plan for you. For a mere $100 the problem can be fixed in it's entirety, including replacing an entire appliance! They cover major issues with plumbing and electrical too.

Cons: Cost to cover major things in your household is about $635 per year. I would say if your home are relatively expensive, it is worth it to go with AHS because if an expensive fridge (or any other item) breaks it's replaced in that $100 service fee and you end up saving a ton of money. My unit is not that upscale so in 2-3 years if only 1-2 problems occurs then it really doesn't pay for itself. Right now I use it for the convenience and peace of mind of having that service available while I'm not near by.

My suggestion, and something I have been seriously thinking about now is perhaps start with AHS and save money as you go for future incidences that require fixing. The beauty of AHS is they tell you exactly what company they're going to use to deal with whatever problem you have. Collect the names/numbers of the companies they send out and keep it for your own future reference. Eventually you probably will have enough money saved that you wont need AHS and can manage to just call up these companies yourself and take care of it.

One issue I find a little frustrating is they'll occasionally call me during a service request and tell me certain things are not covered, and they'll ask for an additional amount to repair the entire thing (though it isn't usually some ridiculously high amount, maybe another $100-$200 depending on the problem). This doesn't happen all the time but it can be annoying. Be careful to read through the plan policies and see what is covered and what isn't so that you know exactly what you're getting for your money. 

Sorry for the lengthy post but I hope the information I included is useful to you!

@Brad Smith @Chirag Parikh

Chirag - good to hear about AHS.  I use them as well for a rental and generally agree with everything you mentioned.  The only thing to add is for new people signing up, ask if they have contractors in your area.  

In my area of Vermont, they don't have too many, although they will allow you to use your own and then get reimbursed.  The downside is that it takes 1-2 days for them to respond they don't have anyone, I then have to find someone, and the tricky part: the contractor has to call AHS directly and get approval.  So that whole process can take 3-4 days.

I've done 4 calls in 3 years and they did always pay it, after the $100 service fee.  On other rentals I have contractors I already know for a good rate, so I don't use warranties on other properties. 

Hope that helps!

- Tom

I have AHS on my rental property and my personal residence.  

At my rent house, my inside coil on my A/C unit cracked and was leaking.  They replaced the entire inside unit because of that.  My only cost was the service fee $75 and the cost of Freon.  

If you don't have the policy that includes the appliances, they won't touch your stuff. However, if you have permanent or built-in appliances, those are covered regardless.  And they will replace them if they can't repair them.  In my personal residence they replaced my cook top because it was old and the igniters went out (and couldn't be replaced due to part discontinued).

The value I've gotten out of the service has been great.  I would get it on home (personal residence) purchases, paid by the seller (for at least the first year) and on older rentals, say, 8 -10 years old or greater.

Justin

Originally posted by @Daria B. :

@Chirag Parikh

Do they not do replacement if the appliance cannot be fixed? Is this dependent on the "type" of policy I assume?

 If the appliance is covered and they cannot fix it, then they will cover the cost of the replacement (brand new too)!

Whitney B. I have a rental where the appliances are about 15 years old. How does the warranty company decide what to replace the appliance with if for example the compressor on the fridge dies? Do I get choices? Can I upgrade the appliance and pay the difference out of pocket?

@Bob States ,

They'll give you a recommendation on a replacement appliance.  Based on the dimensions and finish.  I know you can choose a different one, but I believe it has to be a brand they "support".  You can also get a more expensive one and pay the difference, but it will take much longer to get shipped to the contractor I believe.

Justin

@Brad Smith ,

As far as response time goes, it is slower than buying a replacement part and getting a contractor out ASAP, but not too bad.  You're dealing with the warranty company to make the claim and they send out the contractor.  The contractor decides if it's repairable and will repair it then and there, have to order the part and fix later or deem it non repairable and get with the warranty company for replacement appliance/system.  If they will replace the entire appliance, you have to email them the dimensions and finish.  They'll subsequently email you a comparable match.  After you decide what appliance you want, they ship it to the contractor and they come out and replace it.

So the process can take longer for sure.  

Justin

I can tell you from being in the service contract industry that they're typically pretty "shady". They will ask leading questions to look for reasons not to pay claims. Such as: How long has the issue been going on for? Has it always functioned previously? Before this issue on a scale of 1-10 how well was it running? Etc. They are in business to make money not spend it. Realistically if you pay 500 how much do you think they will pay out? Most of them have a relatively low limit of liability. 98% of folks would be better off on self insuring. 

Ex: On our primary one was included. Paid for by the sellers. Our dishwasher is a 10 Year old GE that has always left "spots" on our dishes. Regardless of detergent type or "rinsing" agent. 

Our DW started to leak. My wife told him that it has always "left" spots. The home warranty company actually said, "Oh well then its pre existing. We can't cover the claim but you can pay the 75.00 to get a tech to come out and look at it." 

I spent 15.00 on new seals using GE's parts fiche and fixed it myself.

Thanks, folks, I was afraid that what Ryan said might be the case.

Originally posted by @Brad Smith :

Thanks, folks, I was afraid that what Ryan said might be the case.

 It's not to say that they are a scam. They may work well in some situations. But read those terms and conditions CLOSELY. They are laced with outs, limits of liability, and more. BTW just because you didn't notice the issue doesn't mean its not pre existing. 

Bob, typically the appliance or part will be comparable to the one that needs to be replaced. It may not always the same brand or color. My advice is to always read your contract carefully and ask any questions you have. You should have a full understand of what is covered and not covered. Hope that answers your question!

I guess it comes down to good/bad experiences.

I had AHS for the first year on my primary residence. I purchased brand new appliances and the dishwasher installer wouldn't install the new one because I had a "hot water valve leak". Not knowing really what he meant by that I called AHS. They sent out a plumber in about a day and he fixed it. 

It turned out to be a very easy fix and it cost me $75 total. The policy I had was purchased by the sellers as part of the sales contract. It was about $570 I think.

I didn't renew my insurance, but I did get calls from them asking me to renew. I spoke with one of the agents and she told me if for instance my A/C goes out they will replace the entire unit if they can't fix it. I thought, wow that's awesome! An A/C unit can be up to $3000! Well I went home that day and read the fine print. The deductible was about $1000 and for them to actually replace the unit there was stipulation after stipulation in the fine print. 

I think in many cases the warranty will save you money and in other cases it won't really. 

My advice is really to decide for yourself the condition of the property and if it needs a warranty. Brand new appliances, solid plumbing, new HVAC.....probably doesn't need coverage as much as older stuff does. 

Also, how much hands on type stuff do you as a landlord want to do? If something needs fixing you can call them and pay the 75-100 fee without having to go to the property. In my case, the actual repair to replace my valve cost about $5, but I paid $75.

Something to think about....

I have been using Fidelity National Home Warranty for my personal and rental properties for the past three years and can tell you that I never had any issues with them. Earlier this year I had a water heater leak and they came in and replaced it with a new one. 

Originally posted by @Ryan Dossey :

I can tell you from being in the service contract industry that they're typically pretty "shady". They will ask leading questions to look for reasons not to pay claims. Such as: How long has the issue been going on for? Has it always functioned previously? Before this issue on a scale of 1-10 how well was it running? Etc. They are in business to make money not spend it. Realistically if you pay 500 how much do you think they will pay out? Most of them have a relatively low limit of liability. 98% of folks would be better off on self insuring. 


 That's interesting. I have used home warranties on a number of my properties and have not once had the experience that you describe above. Further, my prices were cheaper about $200 - 300 for AHS. They have replaced water heaters, furnaces, and refrigerators regardless of brand or age.  As for self insuring, that works fine until you lose 20 furnaces in a single winter.  Unfortunately, this is what happened to a good landlord friend of mine. 

In the end, you need to perform your own risk assessment and decide what is going to work for your model. 

Good luck!

-todd

We have First American Home warranty. The seller paid the first year and we just renewed it. We were not planning to renew it but two weeks before the warranty expired our water heater in the 4 plex started leaking and the replaced it (actually we had our contractor do it and they gave us the cash it would cost them to do it).

This was about 2000 dollars and the seller originally paid 800 for the warranty. So we decided to renew it for one more year and see how it goes.

Originally posted by @Ryan Dossey :
Originally posted by @Brad Smith:

Thanks, folks, I was afraid that what Ryan said might be the case.

 It's not to say that they are a scam. They may work well in some situations. But read those terms and conditions CLOSELY. They are laced with outs, limits of liability, and more. BTW just because you didn't notice the issue doesn't mean its not pre existing. 

I'm surprised anybody but a homeowner in the first year has gotten any value out of Home Shield and other similar policies.  Does anyone on this thread have such a policy on more than one rental? I've paid for one year as the seller a few times.  When I do the math for rentals, it just doesn't add up.  Cuts into cash flow and there are tons of exclusions.  5 years at $400 will buy you new appliances.  Save the money for when you really need it.

In general, I never believe in buying insurance for anything you could afford to absorb the cost your self without insurance. By definition, over the long haul, the insurance company is charging more in premiums that it costs in repairs. That's guaranteed; that's just math; that's how the system is supposed to work. The purpose of insurance is to distribute costs across all their policy holders, but they also have to charge for profit and overhead. If you can absorb the costs of replacing appliances and fixing the AC, it will always be cheaper in the long run, especially if you have multiple properties, to not get a Home Warranty.

When I bought my primary residence over a decade ago it came with a home warranty. That first year my toilet was running or doing something, I cannot remember. What I do remember was I paid the plumber over $100 to deal with it, and this is with the warranty! I figured next time I could probably either fix it myself cheaper or find a better plumber, so I did not renew.

Then my aunt who has been renewing her home warranty for years gets the run around when her fridge/AC started acting up. She had to wait on a part or a week of back and forth and this and that. The extra bother of dealing with the warranty company AND the service person didn't seem worth it to me. If I'm the one paying I'm the one they have to make happy.

I (and apparently family members too) have problems when trying to deal with warranties. Some places are great, no questions asked, send us the faulty item we'll take care of it and send a new one right away, others, nitpick and find ways to not to fix or replace it. 

So long story short, I tend not to do warranties.

Originally posted by @Naveed Q. :

I have been using Fidelity National Home Warranty for my personal and rental properties for the past three years and can tell you that I never had any issues with them. Earlier this year I had a water heater leak and they came in and replaced it with a new one. 

 I just filed a claim with them on Wednesday to fix a broken dishwasher on my rental. They charged me a $65 service fee and sent out a contracted company to fix the issue. The contractor never showed up. After doing some research, all the reviews for this contracted company had 1 star reviews and stated a similar experience to mine. I call Fidelity National Home Warranty again, and schedule for a different contractor to come out. Guess what, same exact thing happened. I look that contracted company up, again, all 1 star reviews. I call Fidelity National Home Warranty again, and they say they will send a third company out, I decline. I asked for them to refund my service call, and I am going to be buying a new dish washer tomorrow. I can not believe the level of service they provide, it's absolutely disgusting. The contractors they hire are the lowest bidders, and the quality shows. Why do they even bother calling me to schedule a repair if they don't show up. 

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