Home Warranty: to renew or not? (Louisa: real estate, insurance, appliances)

[vauser]

I've had a home warranty for quite a while but have started to wonder off late, based on conversations with other home owners, if it is worth paying the annual premium at all. I've heard varying opinions about the quality of the contracting companies affiliated with the warranty companies, and so on and so forth.

Given a home that is about 3-4 years old, do you think it is worth paying for a home warranty?

NOTE: This is cross posted (in the real estate forum). I figured it might help to get the opinion of folks who live in the metro where I live as well! (in case, it makes a little more sense to get a warranty in one metro vs another, due to higher or lower costs, etc).

[boyd888]

http://www.city-data.com/forum/north...es-no-who.html

Check out your last thread on the same subject. To summarize: no, they are not worth the money.

[spencgr]

Originally Posted by boyd888

http://www.city-data.com/forum/north...es-no-who.html

Check out your last thread on the same subject. To summarize: no, they are not worth the money.

So, the OP started both threads? Not sure why he thought opinions would have changed in 9 months.

[HokieFan]

We had a home warranty for the first two years we lived in our home. Our home is 23 years old, we were first time homeowners, and I'm a "better safe than sorry" kind of gal but after the second year we let it expire.

1.) We were paying something like $550 a year and then there was a deductible for each issue. How much money were we really saving? Nada. It was costing us money.

2.) We couldn't choose who provided the service/repair.

Our dishwasher broke down so I called the home warranty place. They were going to send someone from 90 miles away (Louisa, VA) to assess it (not to repair/replace but to just look at it and report back to the home warranty their opinion to repair or replace) and there was the $100 deductible. Thanks but no thanks. We bought a new dishwasher from Lowes and they delivered and installed for free. Bada bing, bada boom.

I think home warranties have the potential to help with big ticket items such as HVAC but it will be at their discretion on who they send out, and if they repair versus replace. With your home being only 3-4 years old, I think it's a waste of your money to continue to have a home warranty.

Take the money for the annual fee and put it away in a savings accounts for home repairs. After a few years, you will be able to pay for any needed repairs from that account.

Have you needed use the home warranty yet, OP? If not, that's already at least $1500 you've lost, and could have been saved for future repairs.

[airjay75]

Originally Posted by boyd888

http://www.city-data.com/forum/north...es-no-who.html

Check out your last thread on the same subject. To summarize: no, they are not worth the money.

Yes, ditto what I posted in that thread.

I guess I'll just add that I've personally been thinking a lot about insurance the past couple of days with my homeowners renewal coming in the mail and whether to continue the optional water/sewer backup coverage. One thing I think you have to think about is how much are you paying for the warranty/insurance versus the benefits it provides. For example, if you're paying $100/year and the maximum benefit you could expect is only $1,000, that would be awfully expensive insurance in my opinion - why not just stash the extra $100 per year? If, on the other extreme, you're paying $1/year for a potential $1,000 in maximum benefit, that would be pretty cheap insurance.

So, I guess my question with a home warranty would be how much are you paying versus what is most the home warranty would do for you? In a worst case scenario, I have a hard time seeing a home warranty paying out more than $10k-$15k in benefits, and I doubt they ever even pay out that much. And what are you paying for it? Maybe around $500/year? To me, that would seem like expensive insurance - I'd rather stash the cash away. But, everyone's risk tolerance is different.

[snowdenscold]

Originally Posted by airjay75

Yes, ditto what I posted in that thread.

I guess I'll just add that I've personally been thinking a lot about insurance the past couple of days with my homeowners renewal coming in the mail and whether to continue the optional water/sewer backup coverage. One thing I think you have to think about is how much are you paying for the warranty/insurance versus the benefits it provides. For example, if you're paying $100/year and the maximum benefit you could expect is only $1,000, that would be awfully expensive insurance in my opinion - why not just stash the extra $100 per year? If, on the other extreme, you're paying $1/year for a potential $1,000 in maximum benefit, that would be pretty cheap insurance.

So, I guess my question with a home warranty would be how much are you paying versus what is most the home warranty would do for you? In a worst case scenario, I have a hard time seeing a home warranty paying out more than $10k-$15k in benefits, and I doubt they ever even pay out that much. And what are you paying for it? Maybe around $500/year? To me, that would seem like expensive insurance - I'd rather stash the cash away. But, everyone's risk tolerance is different.

Yes, insurance is inherently a negative Expected Value proposition for the consumer. It's best used for situations in which the potential expense is something that you cannot handle out of pocket.

It really boils down to all the actuarial formulas. For example, insurance company decides there's a 1% chance you'll incur a situation that will cost $5,000 in the next year. But instead of charging you the expected value of $50 (5,000 * .01), they charge you, say $60 in order for them to make a profit and stay in business. Now, if you can handle $5,000 out of pocket, you're better off not paying, since, if you repeat this process/line of thinking enough times, you can save quite a bit of money.

However, if it's something like a 0.01% chance of having to pay $500,000, then again the EV is $50, but this time you're probably better off forking over $60 to the insurance company since you do NOT want to owe $500,000.


So if you have enough savings, I would avoid all warranties on smaller items, and leave it for those big ticket items (auto, life, homeowners, etc.) that you can't pay the costs for in the worst case scenarios.

[7 VII 7]

So here is my thought process. We renewed our Home Warranty last year (2nd year in house) built in the late 60's. It was $550 and has a $100 deductible. Luckly we have not had anything break but the way I see it is if our fridge breaks, I pay $100 for someone to come out to look at it to see if it can be fixed (part of the warranty) or replaced (part of the warranty). If I was to call an appliance person out it would be just as expensive and the part and labor would cost more than $100. If the appliance person says I have to replace the fridge (which we NEED to have) that is about $1,500 minimum for the same that we have now. So the warranty makes sense.

The person saying they went to Lowes (bada bing bada boom) and bought a new one... well yeah that is $700 that probably could have been only $100 with the deductible for them to fix or get a new appliance. I believe most of them allow you to do 1 claim on one piece of appliance a year. So you cant have 2 claims on a dish washer which is the draw back.

I rather spend $550 a year to get coverage to save money that I dont want to shell out in an emergency. I have $1,500 on hand to buy a fridge, but I rather spend $100 and get it fixed/replaced through the warranty.

We mainly got it for the HVAC unit which is 18 years old, but we have not had issues. So if one day it is 20 degrees out and the heat goes... I am calling the warranty place and paying the $100 for them to send someone out to fix/assess it.

[spencgr]

Originally Posted by 7 VII 7

We mainly got it for the HVAC unit which is 18 years old, but we have not had issues. So if one day it is 20 degrees out and the heat goes... I am calling the warranty place and paying the $100 for them to send someone out to fix/assess it.

The only issue there is that it will likely take them a few days to make the appointment to come out. If they cannot fix it, expect another few weeks for a replacement. So, in 20 degree weather, do you really want to be without heat for a month?

[HokieFan]

Originally Posted by 7 VII 7

The person saying they went to Lowes (bada bing bada boom) and bought a new one... well yeah that is $700 that probably could have been only $100 with the deductible for them to fix or get a new appliance.

I rather spend $550 a year to get coverage to save money that I dont want to shell out in an emergency. I have $1,500 on hand to buy a fridge, but I rather spend $100 and get it fixed/replaced through the warranty.
it.

Depends on the age of your appliances. If you haven't used your home warranty yet and that fridge lasts 3 more years, you've just spent $2500 for a $1500 fridge ($500 x 5 years).

As for my dishwasher situation, that was the best solution for us and I don't regret that decision. I was slightly put out by the process of them sending someone to assess the need for repair/replace, reporting back to the home warranty company, and then having to make another appointment for the service tech to come back to do whatever the home warranty approved. That was additional time I or my husband would have missed from work.

In OP's case, his home is 3-4 years old. If he hasn't had a need to repair/replace his appliances yet, odds are his appliances, HVAC, etc. will be fine for at least the next 10 years.

But like another posted mentioned, it's all about your personal comfort level.

[slim04]

Home warranties aren't good for older HVAC systems. They force you to get cheap, temporary fixes at a $100+ a pop and fight with you for a replacement. On top of that, they have very low reimbursement rates, so they can only get struggling HVAC firms or those that are far away and you often have scheduling nightmares. It could take them 2 weeks to complete a just a repair, not a new system, during the busy summer or winter season.

To get an actual new HVAC system will take months of battling with them while they try to find an excuse not to pay, or saddle you with a terrible and cheap system. Everyone I know that tried to do this gave up because they just couldn't go that long without a consistently working HVAC unit.