Atlanta-based consumer watchdog Clark Howard (www.clarkhoward.com) says the only good thing about owning a home warranty is that it might help sell your home, but if you're staying put, Howard said a home warranty's protections are limited.
"Home warranties aren't worth the paper they're written on," Howard said. "If something goes wrong in your home, the warranty companies are brutally difficult to deal with. They require you to use their contractor only. That contractor may or may not come on schedule while you're burning up in the heat of summer without AC or freezing in the dead of winter without heat. And then you've got a deductible on top of that!"
Howard said new home warranties are typically 2/10 warranties. That means solid protection on your major systems for two years, then minimum protection for 3 to 10 years after the date of purchase.
On used homes, Howard said the warranties are typically 1-year renewable warranties. They cover heating, air conditioning and major electrical & plumbing systems.
But here's the thing: Like Howard said, home warranty companies are only as good as their authorized contractors. If the company partners with unlicensed contractors or contractors with poor Better Business Bureau histories (www.bbb.org/us), you could have a mess on your hands. That is, if they even show up.
So Howard recommended an alternative: set aside $50 a month in a repair fund. Tap into it instead of a $400 to $600 annual warranty when major things start to fall apart.
Nicole Ritchie, spokesperson for the Memphis-Based warranty company American Home Shield (http://www.ahs.com/), argued home warranties relieve homeowners of the burden of having to hunt for a reliable contractor when things quickly go from bad to worse.
"At American Home Shield, we have one of the largest contractor networks in the nation, more than 11,000 strong, and each is regularly evaluated on their performance," Ritchie said. "Homeowners can select which appliances and systems they would like to cover and then choose their annual contract cost and service fee."
Like anything else, you should shop several types of home warranties. Compare their costs, histories and reputations, especially their deductibles and rates-of-response.
You should also compare them to the cost of starting your own repair fund -- and to the cost of a solid termite contract that includes a repair guarantee.
Copyright 2011 America Now. All rights reserved.
