is the "Residential Service Contracts" AKA "Home Warranty" necessary when buying a condo apartment? (Earth: insurance, earthquake)

[giveitaname]

Originally Posted by colcat

If your AC and appliances are old, I would opt for the warranty. At least for now. I cancelled my warranty after they gave me the run around with properly fixing my AC. They came out 5 times last summer to "fix" it and finally I had an AC repairman( paid for by me) to diagnose what the real problem is. I then called the warranty service and insisted that they fix it correctly. Bottom line, they do the bare minimum to fix it until it completely breaks, Very inconvenient in Houston summers.

See, buying the warranty is supposed to bring you peace of mind, not just to save you $, now people only get the latter part but not the former portion. I guess it is right that the older you apt/condo is the more likely you should consider buying it?

[giveitaname]

Originally Posted by jordanaf

Have the seller pay for it. And be careful which one you get. Your Realtor should be able to recommend a couple. Don't expect them to take care of everything as they are a business and some of them will try to wiggle out of repairs. They come in handy if you don't know contractors that you can call. Homeowners insurance is not optional if you are financing.

that is the part of negotiation, not every one can get it, unfortunately

[giveitaname]

Originally Posted by Ashley J

Is a homes warranty necessary? Yes, for home owners who want coverage on home systems and appliance repair.
Is it mandatory? Home owners insurance coverage may be required by your lender, but home warranty is not. For example a home warranty plan from TotalProtect covers approved appliance repairs and replacements while Geico home owners insurance may cover fire damage, theft etc.

From you just described, I see some overlaps
Assuming paid in full during transaction, both are optional now, which one do you prefer to have, both, none, or one of them?

[giveitaname]

Assuming an OLD (say built in 70s) apt/condo was paid in full during transaction, both the home insurance and home warranty are optional now, which one do you prefer to have, both, none, or one of them?

[ToyYot]

Originally Posted by giveitaname

From you just described, I see some overlaps
Assuming paid in full during transaction, both are optional now, which one do you prefer to have, both, none, or one of them?

They do not overlap, one covers repairs and replacement due to mechanical failure, the other (insurance) pays for repair or replacement (less depreciation, usually) due to a named peril e.g. fire, windstorm, etc.. There are also "all risk" insurance policies which have wider coverage . Either way, the insurance policy will EXCLUDE coverage damage due to mechanical breakdown, failure, wear and tear etc. that the warranty MAY cover (it may not in many cases, check the fine print).

You NEED insurance. Whether you're required to or not, you'd be foolish not to get it.

You don't need a warranty and whether or not you get it really depends on you risk tolerence and what you think may break in the near term. If you have a few thousand sitting around you're probobly better off not getting it. Like an extended warranty on an appliance, the odds are in favor of the warranty company.

[giveitaname]

Originally Posted by BDFP

They do not overlap, one covers repairs and replacement due to mechanical failure, the other (insurance) pays for repair or replacement (less depreciation, usually) due to a named peril e.g. fire, windstorm, etc.. There are also "all risk" insurance policies which have wider coverage . Either way, the insurance policy will EXCLUDE coverage damage due to mechanical breakdown, failure, wear and tear etc. that the warranty MAY cover (it may not in many cases, check the fine print).

You NEED insurance. Whether you're required to or not, you'd be foolish not to get it.

You don't need a warranty and whether or not you get it really depends on you risk tolerence and what you think may break in the near term. If you have a few thousand sitting around you're probobly better off not getting it. Like an extended warranty on an appliance, the odds are in favor of the warranty company.

Applaud

[giveitaname]

Insurance companies must love some of the guys here a LOT

[Wardendresden]

I spent 30 years as an insurance underwriter, ratemaker, product development researcher, and compliance officer in both personal/commercial lines insurance, and in my final year of employment doing home warranty product development.

Homeowners insurance is something you definitely want, condo or otherwise. Generally, although there may be some individual state exceptions, in a condo the Homeowner Association insurance will pay for the walls, roof, and basic structure. Your own condominium insurance pays, following a deductible, from the wall paint inwards and includes all your personal goods--furniture, clothing, electronics---for "all risk" coverage (which there is no such thing-it is a sales ploy). There are limitations in every policy--a couple of the more prominent ones are mold and damage from slow leakage of water. Sometimes you can have those waived for an additional premium. In the "old" days, the policy covered "mysterious disappearance", most policies now have removed that (because of fraud) and have replaced it with "theft". In addition, your condominium insurance provides liability protection should someone get injured on your premises and for certain, limited, off premises situations as well.

Home warranties are more problematic. There is not a deductible, but most have a "service" charge for each time a contractor visits your house/condo. Basically you are paying whatever contractor the home warranty provider hires to drive out there and see what the problem is. If it's covered under the home warranty there is generally no other charge for repair. The home warranty company reserves the right to either repair the product or replace it with like kind. The policy itself will determine whether the company must provide coverage, and since it is contractural law, the policy will normally be the deciding factor in a court of law.

Homeowner/condo/renters insurance is regulated pretty well in Texas and insurers have to actuarially justify the charges they make on coverage. But this year the price of all homeowners insurance has skyrocketed because of the extreme weather across the country--a huge hailstorm here in Dallas. Companies have traditionally used a twenty year period for "catastrophe" calculations in their premiums. However, with weather in recent years becoming more extreme, I wouldn't be surprised if they have lobbied insurance departments/legislators to allow them to use a ten year period. My own renters insurance went up a dramatic 39% and we have not had a claim.

Home warranty business is not regulated as well in most states, and I'm not sure about Texas. But here is what occurred with many of the home warranty policies my company (a large midwestern operation) sold. They would price the product based on past experience and include a load for between ten and fifteen percent profit. Then they would find realtor groups to sell the product and, in some states, the realtor could simply mark the price of the home warranty up as much as they wanted--100% or more, if they thought they could sell it.

It works the same way in many states for electronic warranties--and even for automobile warranties when they don't come from the manufacturer. That's why on autos you can almost always negotiate the cost of a warranty--it's been marked up a ridiculously high amount. The last vehicle I purchased on which I wanted an extended warranty was a Honda Ridgeline. The price of coverage was $1650 to extend to six years, 100K miles. I talked the dealer into providing the coverage for $1295--and I know he still made a boatload on it.

Now because Texas is one of the better states in regulating "normal" insurance, there is a possibility that they may be better at regulating home warranties. If you have a gripe about a home warranty provider, I suggest contacting the Texas Department of Insurance and asking them if they have any regulations governing how home warranty providers respond to claimants. A call would get you the initial answer, but to get a response you will need to put it in writing, send it to the TDI, and copy your home warranty company.

Since as a compliance officer I had to respond to insurance department complaints on behalf of an insured, I can tell you WE HATED THEM! I was very successful defending ones where we had made a right decision, but there were times I had to take the information to a senior executive so we could pay the claim or make right with the insured whatever our company had done improperly.

You do have options available to you.

[ToyYot]

That was a very informative post but I do take issue with this:

Originally Posted by Wardendresden

"all risk" coverage (which there is no such thing-it is a sales ploy

All risk coverage is decidely different than named perils coverage. Of course if your former company marketed a named perils policy as all risk then yes, it could be a sales ploy but a more fitting desciption would be fraud.

[Wardendresden]

Originally Posted by BDFP

That was a very informative post but I do take issue with this:



All risk coverage is decidely different than named perils coverage. Of course if your former company marketed a named perils policy as all risk then yes, it could be a sales ploy but a more fitting desciption would be fraud.

There is absolutely no Homeowner or automobile policy ANYWHERE in the United States that covers ALL RISKS. In every such policy they will state that they cover all BUT the named exceptions. But an agent will often stress the "all risk" aspect without mentioning the named exceptions. For instance, no regular homeowner policy provides coverage for flood. You have to buy a separate policy to get such coverage. But an agent who says to a client, "This policy is all risk" may be unaware that the client believes it covers flood as well.

Under contractural law, the policy holds true. The insurance company would not pay for flood regardless of the agent's potential misrepresentation of coverage. An insured could sue the agent, but I think without something in writing it would be the word of one against another.

I saw that kind of misrepresentation occur more than once.