Does having a home warranty pay off for homeowners?

When you buy a house, a home warranty is often included as a little extra to entice a buyer to make the deal.

But how valuable are those warranties and are they worth the price? In our opinion, they are generally not worth the expense involved and will not provide the kind of help you expect to get.

Who pays for the warranty?

If it’s a new house, the warranty is generally provided by the homebuilder. It will cover structural defects in the house for a number of years as well as guarantees on HVAC and other systems and some appliances.

It’s a little like having an extended warranty on a number of different things in the house. Since everything in the house is probably new anyway, the chances of a breakdown are slim and few homeowners ever have to use the warranty coverage.

But in sales of existing homes, the seller or real estate agent usually pays for a one-year policy which guarantees repairs on appliances in the home, along with the AC and the plumbing. Since the appliances and basic systems in the house can be old or well-used, the warranty often seems like a good deal to the buyer.

What are the problems?

Many consumer groups say warranties have many exclusions to avoid paying for really expensive problems like roofs, windows and chimney repairs.

Some homeowners are surprised to find out that policies will cover repairs for appliances, but will not replace them. There are deductibles and charges for service visits, too.

And you don’t get to choose the plumber, electrician or repair person who comes to your home. The warranty company chooses the contractor.

There are also frustrations and delays involved in filing claims on these policies.

The solution?

The homebuilder’s warranty may be useful, but with an older home, you might waive having the warranty, which could cost the seller $400-$500, and ask for the price of the home to be reduced.

One option: Use the money to add a rider to your home insurance policy to cover problems with your air conditioner or range or refrigerator. Because of complaints about warranties, insurance companies are now developing new options to handle these issues more efficiently than a home warranty.

Clayton Janson of Phocus Insurance in Phoenix also notes that many times the problems that come up in warranty situations are issues that may be covered by your home insurance anyway.

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