Are home warranties worth it?

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Home warranty/broken TV
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Maybe you’ve seen or heard one of the many advertisements out there for home warranty companies — they’re pretty hard to miss. Or, perhaps some of your friends have bought home warranties themselves. That may leave you wondering: “Are home warranties worth the money?”

In this article, we’ll discuss:

  • What money expert Clark Howard thinks about home warranties
  • What home warranties do and don’t cover
  • Home warranty horror stories
  • The one case where a home warranty might make sense

Why Clark Howard says home warranties are mostly a waste of money

According one survey, home warranties were a $2.3 billion business as of a few years ago.

Clark thinks that’s 2.3 billion dollars too many.

“It sounds so wonderful,” Clark says. “You pay five or six hundred bucks and supposedly you are buying peace of mind for repairs and replacement of appliances and major mechanical in their house. But when something goes wrong, the warranty company is, like, ‘Who are you? You want us to do what?’”

“Trust me on this: Don’t waste your money on a home warranty. Instead, save your money for when something does break in your home.”

Clark says that in reality, if something goes wrong in your home the warranty companies are brutally difficult to deal with. They require you to use their contractor only. That contractor may or may not come on schedule while you’re suffering in the summer heat with a broken AC unit. And don’t forget that you’ll have a deductible to pay on top of that.

Clark’s word not enough for you?

Consider this: According to the Washington Post, American Home Shield (the country’s largest home warranty company) has been the subject of nearly 11,000 complaints to the Better Business Bureau in the last three years alone.

What home warranties do and don’t cover

In addition to being notoriously hard to work to work with, home warranty companies don’t always make it clear in their advertising what isn’t covered by your warranty.

While most home warranties will generally cover the appliances in your home, the systems in your home (your HVAC unit, for example) or both, there can be some notable exceptions.

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These can include things like:

  • Fireplace systems (even if they are your main source of heating)
  • Alarm system wiring
  • Telephone wiring
  • Plumbing lines that are damaged by roots or foreign objects
  • Broken or collapsed sewer lines outside your home’s foundation

Here are 11 more things that may not be covered by your home warranty.

Home warranty horror stories

Still not convinced that home warranties are a bad idea?

Team Clark and our Consumer Action Center hear all the time from people who feel like they’ve been taken for a ride by their home warranty company.

For example, Bill C.B. wrote on our Facebook page:

“My toilet has a leak at the base of toilet (I think the wax ring needs to be replaced). And it rocks back and forth when sitting on it. Called for service, technician came out and [they] denied the repair because you can not see the leak on top of the vinyl floor (it is slowly seeping in between the concrete slab and the vinyl flooring). But [they] took my $100 fee.”

And Deborah F.H. said:

“I got one of these with the purchase of a new condo. The bathroom faucet that started leaking 30 days after we moved in? Not covered. The hot water heater that failed? Replaced with a far inferior one! And still cost $600 for ‘whatnots.’ [The company] called me about renewing & I just started laughing.”

The one case where buying a home warranty might make sense

Despite everything you’ve just read, Clark does have one exception to his rule against buying home warranties.

“When you’re selling a home, offer the buyers a used home warranty, even though I think they’re worthless,” he says.

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He points to this Los Angeles Times article, which references a study that says that homes that come with a warranty sell 11 days quicker and for $2,300 more, on average, than those without them.

“If that makes me a hypocrite, so be it,” Clark says. “These warranties are a joke — they seldom pay off — but they’ll pay off for you as a seller.”

Final thought

Although a home warranty may be tempting you with the notion that you’ll have peace of mind in case anything big or expensive in your house breaks, hopefully at this point you know that they’re a bad idea.

Instead, put away some money in a home fix-it fund of your own. You’ll be prepared to take care of any emergency yourself — and not at the mercy of a company who just wants to keep more of your dollars in their pocket.

More stories you might enjoy from Clark.com:

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