Jul 30 2012

Should we renew our home warranty?


When we bought our house last September, the sellers included a home warranty. We chose the company and picked the same one my brother-in-law used. His air-conditioner had problems and the company eventually replaced the entire unit, so that was the basis of my decision.

We’ve had to file two claims since we bought the house, both for our AC. The first claim happened on the day we closed. Oy. The second claim was earlier this summer. We’ve had record heat and drought conditions here in Indiana, and the ACs are just plain working hard. I was satisfied with their customer service and also with the service technicians they contracted.

We have a $100 deductible, per instance. These two claims have saved me about $170. Not a lot of money, and if I had to pay the warranty myself, it wouldn’t be a savings at all.

Our warranty is about to expire, and we are trying to decide whether to renew.

Why pay $429 to renew our warranty, when we could add that to our emergency fund and self-insure?

Well for us, it’s our risk tolerance. Our house is 12 years old. Might even be 13, as I’m not totally certain when the ah…house birthday falls.

All appliances are original. I have no idea how old the washer/dryer are — maybe they were new with the house, or maybe a previous owner brought different units. Things are going to start breaking, since appliances aren’t designed to work forever. We’ll repair them if feasible of course, but we also have to be prepared to replace them.

Replacing one appliance would likely cost more than the price of the warranty + $100 deductible. A dishwasher might be less, but if we needed to replace the stove or fridge it would be more. If we needed to replace the HVAC system, it could set us back a few thousand. Just ask my friend Karen, who now has a brand-new HVAC.

The truth is, it probably would be fine to just bank the $429 this year and self-insure. We could pick our own servicepeople for a repair, and have total freedom in selecting a nicer new appliance if we needed to go that route.

I just don’t want to spend gobs on a new HVAC this year if we can avoid it.

Our home warranty has a cap of $1,000 per kitchen appliance. Maximum for other equipment is $5,000, with a $15,000 maximum liability for all claims. Included: Clothes washer, dryer, oven/range, heating system, plumbing system, garbage disposal, water heater, dishwasher, fridge, electrical system, ceiling fans, door bell chimes, garage door opener, air-conditioner, water softener, range exhaust hood.

Either way, we want to build up a separate savings fund for home repairs. Things like appliances, HVAC, roof, etc. Those things will eventually need repaired/replaced and we’d be better off to have the savings in the bank.

We do have an emergency fund that could cover these repairs, but for me I’d prefer the e-fund to have our backs in the case of a job loss and for insurance deductibles. Additional savings and a home warranty might help bridge that gap.

Not totally sure what we’ll decide to do. We have a few weeks to decide.

How about you? Home warranty worth it, or a rip-off? Would you renew, if you were me, or would you self-insure?

Posted under Uncategorized | 11 Comments »

11 Responses to “Should we renew our home warranty?”

  1. Your home warranty sounds pretty worthwhile for the price. The one that came with our house was only about $300, I think, and the coverage limits were ridiculous. $200 deductible (I think), and $1500 limit per occurrence or something ridiculously low like that. Plus there were all kinds of rules and limits on what they would actually fix. (We determined last summer that because our HVAC system was installed improperly, and the improper installation was “preexisting” when we bought the house, they wouldn’t have paid for the replacement anyway. Grrrr.)

    With a $1,000-$5,000 limit and a premium under $500, it seems like a good idea to hang on to it. Most common issues (like a broken appliance or the HVAC or water heater or whatever) will cost somewhere in the $1000-$5000 range, so it’s a pretty good bet that you’ll be covered completely when something does go wrong.

    That’s the nature of insurance, though! It’s so hard to know whether you’re throwing your money away or making a good investment. And of course the rule with insurance is that as soon as you drop the coverage, that’s when you need it!

    Since it sounds like your warranty will actually cover things, I say it’s worth it.

  2. I’m not sure why you think a 12 year old house is old and falling apart. My daughter purchased a home last summer which also included a home warranty. Her house was built in 1947, which is slightly more than 12 years. Her furnace is at least 25 years old, may be more. Still works though. AC the same. She had problems with the microwave, which was so inexpensive that her deductible covered the whole thing. And the dishwasher, which they replaced but with the crappiest unit so she will have to buy a new one at some point. Then there is the oven that burnt everything, including all her pans. I think it is original to the house but the warranty company was determined NOT to replace. Somehow they did manage to find a part for it (probably at a junkyard) and it does work again which is a testament to the serviceman who made the call and fixed it. But, seriously, how long does a 40+ year old oven have? She is currently saving up for a newer model. Just replaced the frig which was an energy hog the week after her warranty expired. She chose not to renew after the stove fiasco (fixing with used parts).

  3. Well it’s not that it’s “old,” but they don’t make appliances like they used to. Houses built in the 50s era are famous for having well-built appliances and structure and stuff. I do hope my appliances last at least another 5+ years or more and hopefully at least another 10 for the HVAC.

    You bring up a good point about when the home warranty company steps in and replaces a dishwasher with a lousy unit. I don’t want that. My fine print also states they don’t have to match colors so I’d be annoyed with a mismatched appliance if I could have picked a different option myself.

    I dunno. I’m still so new to home ownership and how long things should last. I hope that things do last a long time around here!

  4. Maybe double-check the fineprint about how much control you have over replacing the appliances and hiring contractors. Even my crappy home warranty gave us a lot of control. We did have a list of “preferred” contractors, but we could use someone else if we wanted to — it was just a bigger PITA for us because we’d have to submit the claim ourselves instead of the the contractor submitting it directly.

    I can’t imagine that they wouldn’t let you replace an appliance with what you want as long as it’s in the price range (or let you pay the difference if you wanted something fancier), but they would probably much prefer to fix it than replace it, so you might be fixing a broken appliance over and over for a couple years before they agree to replace the dang thing. I have heard that.

    In most cases, I’d rather fix it than replace, too, but I’ve lived in lots of apartments that did that sort of thing, and it eventually does drive you nuts. We had a refrigerator that kept breaking and breaking and breaking like once a month for MONTHS before they finally replaced it, and it was a big pain every time it broke!

  5. I lived in one awesomely managed apartment where the maintenance was top-notch. They knew how to repair things, and they knew when to call it dead and order a new one.

    I don’t want to be playing the “put some duct tape and glue on it so it lasts another year” game.

    If I’m interpreting the terms correctly, we COULD have the option to take cash instead of having them replace something. We’d have to prove to them that we did indeed purchase a new dishwasher or whatever to be reimbursed.

    Looks like the cash amount would be less than their determined replacement value, but it does buy some flexibility if I wanted to put in something higher-end I guess? I don’t know how they determine how much they’d pay out. Says it’s their sole discretion.


  6. Oh and I forgot to add — I’ve lived in some horribly managed apartments before where I had to live with falling apart fridges and stuff while they made endless repairs that never held.

  7. When we bought our condo, it came with a warranty that we only ever used for one minor issue. We never renewed it. Our condo was built in 1982 and we have lived here for 7 years. For the first 5 years we lived here we never really had to replace anything or fix anything. Then it all hit at once around christmas time 2010. We had to replace our washer, dryer, computer, and water heater all within about a 2 month time period. Even still, I think warranties are a waste of money except on cars. I never buy them any more on any appliance or computer. When I used to buy them, I never used any of them. Now I just take a chance. I think over all it works out in my favor.

  8. I wouldn’t pay that premium to receive so little. We save for replacements and repairs. Each to their own though.

  9. We had a home warranty on our first house. Gosh, did I hate that thing. Just to have someone come out to fix (or look at) the problem cost $100, and it seemed like every time we called someone, they determined that it was not something covered by the warranty. So we basically wasted $100 (more than once!) just to have someone tell us it wasn’t covered by warranty.

    We also had a situation like Karen described above … a small leak (caused by a cracked PVC water pipe) which they wouldn’t fix because it was “preexisting” – they said the pipe must have been installed cracked. Even if they had fixed it, they told us upfront they would not pay to fix the drywall they had to cut through to get at it.

    Anyway, I don’t think this comment is of any use to you because your warranty sounds much better than ours. I just still get angry when I think of the money we wasted on the service calls which we could have just put toward the repair.

  10. We had a similar warranty included when we bought our house in 2008. We used it once to replace a dishwasher and saved a few hundred dollars.

    We chose not to renew and instead just fund an account for future repairs and replacements.
    Justin @ The Family Finances´s last post ..5 Ways To Cut Motoring Costs

  11. We can never predict the future and it is always wise to have a home warranty if some problems occur.

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Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

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