Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Best is a savings account, and references from your neighbors, co-workers, and friends for tradesmen.
On average you will pay more than you get out. This is why those companies are in business. If they paid out more than they took in on average they would rapidly go out of business.
If you can come up with real evidence of why you believe you would be in the minority of customers who get out more than they put in, then it might be worth considering.
Personally, knowing that insurance and service contract companies pay people all day long to figure the probabilities a lot better than I can, I only take insurance against risks that would be devastating (fire, flood, liability, death) not against normal repairs that could be reasonably anticipated.
I'm not in favor of these warranties as I believe (rightly or wrongly), they provide poor value and I question the protection I would really get when I need them. It's all about the details of how they are written and the service they provide when things go wrong. To that point, I believe (rightly or wrongly) that they are sold to home sellers to make homes more attractive to nervous buyers. That might be value for money for the seller if it helps the sale. But do they provide value for money for protecting someone from big repair/replacement bills? I don't believe they do. For years warranty companies have had real estate agents as their primary "customers", not consumers looking for protection. So they evolved to meet the needs of the real estate market rather than the end consumer to whom they provide protection. Their success depended on real estate agents recommending it to sellers.
This has nothing to do with the fact that most consumers will pay in more than they get out. That's how all insurance works. It's the fundamental principle of all insurance. sharing risk across a pool. Everyone pays "a little" and the unfortunate few who need it benefit from coverage and others benefit from security and peace of mind. Most people are happy when they don't need to use insurance. Most people don't say well I paid $800 this year for life insurance and I got $0 back so it's bad value. That's not proper logic. I'm not saying all insurance is a good value (much of it is NOT) just that your logic to demonstrate that it's poor value is faulty.
I completely agree with you about insuring the big stuff. But "big stuff" is relative. Life will go on if I lose my $800 phone but for many people, it would be devastating and that's why poorer people insure stuff like that. Unfortunately (i believe) that the smaller the items being insured the worse value that insurance is simply because of sales and marketing costs for the insurance, fraud, and it being targeted at less sophisticated consumers or its lower cost makes it less scrutinized by consumers. But the principle of paying in more than you get out "on average" (whatever that is supposed to mean) has nothing to do with it.
My RE agent talked me into getting a warranty (Old Republic) on my mobile home in June and I'll never ever have another home warranty again.
I sold that mobile and moved to a 55+ mobile home co-op and all I need to do is walk down to the office and ask: You know a good, reasonable, trustworthy plumber, auto mechanic, A/C repair man, electrician? Who do most of the people in this community call on?
As for replacing an HVAC, if you go to the review sites for all the HVAC manufacturers, what will you see? Unsatisfied completely dwarfs the Satisfied. And that even goes for Trane, Carrier, Tempstar, you name it! Good luck making a decision on that one!
I completely agree with you about insuring the big stuff. But "big stuff" is relative. Life will go on if I lose my $800 phone but for many people, it would be devastating and that's why poorer people insure stuff like that..
Anyone who will be devastated by the loss of an $800 phone has no business owning an $800 phone.
Anyone who can't come up with $2000 to fix a furnace needs to very seriously rethink home ownership. Part of owning a house is having enough savings to cover typical repairs. If you don't think you can manage to buy a house and have enough resources left over to cover typical repairs, you shouldn't do it; or you should buy something less expensive.
if one had items inspected, and the inspector laid out the remaining expected lives of these items, then it might very well be a wise decision to have a warranty, at least the first year, and especially when it is paid by the Seller. Looking at the participants, I'll await the response that the $500 has now been mortgaged over 30 years.
If there's a high likelihood of the HVAC failing in the next 12 months - let's say a 25% chance. And let's say the HVAC can be replaced for $6K.
There are many new buyers today that are capable of saving up $6K in a year if they are prudent, and set aside a reasonable amount every month to build a repair fund. The guideline I see and hear is 3% of the home's value (which is of course a VERY rough number, since a $1MM 700 sqft house in CA is different cost from a $1MM 10,000 sqft house in Tennessee). Alas, the first-time Buyer of a $200K house that is able to save $6K each year will be well-prepared when that HVAC does break the 2nd - 4th year. If it blows up year 1, it's a $100 service call.
But just saving the $500/year at a $42/mo clip, as someone suggested, isn't going to put you in the right position.
We've had one for several year with First American. We've been very happy with them and the contractors they use. We have the cash to fix pretty much anything, but I'd rather pay $42/month and a $75 service fee and have them take care of the issue instead of using my savings to do so.
It really depend on your wants and needs. Make your own decision and don't worry about others who tell you how you should or should not save/spend your money.
Before you decide on any Home Warranty company check out their reviews. I think you will find that they have a lot of dissatisfied customers. My mother and I are both in that category.
Thanks everyone! I think I am not going to get a HW, but will try to save up each month for anticipated repairs. I went to Home Depot like night to look at kitchen appliances. Gas stoves and refrigerators are the most expensive items, and there are good ones of both under $1000, gas stoves as low as $500, with free installation! I am still concerned about HVAC, but I pray it won't act up for a while.
Be proactive on the HVAC.
Have it assessed and serviced.
If you don't have a preexisting relationship with a trusted HVAC company, find one now, and get a full assessment and service as needed.
Deferred maintenance will bite you in the end....
Thanks everyone! I think I am not going to get a HW, but will try to save up each month for anticipated repairs. I went to Home Depot like night to look at kitchen appliances. Gas stoves and refrigerators are the most expensive items, and there are good ones of both under $1000, gas stoves as low as $500, with free installation! I am still concerned about HVAC, but I pray it won't act up for a while.
Warranties are best on homes with older big ticket items like AC/Furnace/water heater. Even then it's best to have the upgraded policy because many of the base policies have exclusions for rust and such. As someone pointed out, those companies make money on the average. The ones they lose on are the ones where they have to replace expensive items.
An annual servicing can extend the life. Change filters regularly. Use the cheap ones and not the expensive ones.
if one had items inspected, and the inspector laid out the remaining expected lives of these items, then it might very well be a wise decision to have a warranty, at least the first year, and especially when it is paid by the Seller. Looking at the participants, I'll await the response that the $500 has now been mortgaged over 30 years.
If there's a high likelihood of the HVAC failing in the next 12 months - let's say a 25% chance. And let's say the HVAC can be replaced for $6K.
There are many new buyers today that are capable of saving up $6K in a year if they are prudent, and set aside a reasonable amount every month to build a repair fund. The guideline I see and hear is 3% of the home's value (which is of course a VERY rough number, since a $1MM 700 sqft house in CA is different cost from a $1MM 10,000 sqft house in Tennessee). Alas, the first-time Buyer of a $200K house that is able to save $6K each year will be well-prepared when that HVAC does break the 2nd - 4th year. If it blows up year 1, it's a $100 service call.
But just saving the $500/year at a $42/mo clip, as someone suggested, isn't going to put you in the right position.
Interesting that the guideline is 3% as that's also a guideline cost for a buyer's agent.
In the end, many buyers are indirectly paying around 3% for the services of their buyer's agent. So $6000 for a $200k house. Unfortunately many buyers do not need a "full service" buyer's agent (for example, they might benefit from a few hours of help contracting, etc. but within that 6k there is a lot that many do not need for that kind of money - e.g. paying for being driven all around town, etc. Sad when a buyer is paying 6k for their buyer's agent when they could put that 6k (or some significant part of it) into an emergency repair fund. And of course 6k is not just 6k when it's mortgaged for 30 years - it can approach double that amount.
If the system were different and didn't pack around 3% buyers agent costs into every home with effectively no choice in the matter, consumers would be much better off as this "3%" example illustrates.
This is not a criticism of buyers agents - a buyer of a modest 200k house might want to pay that 6k toward full service buyers agent services. But many would much rather use all or part of that amount towards a repair fund. The point is that it should be a consumers choice. Today, the system doesn't offer that choice.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
