We want to let you in on a little secret – homeowner’s insurance doesn’t cover busted furnaces, leaky roofs, or burst pipes. These are all maintenance issues that eventually afflict every property – hence, it makes little financial sense for any insurance company to cover these repairs.
However, there are companies who offer policies that cover these routine, expensive issues. They operate in the home warranty industry – by paying them a monthly or annual premium, you’ll only be on the hook for a deductible when these inevitable repairs need to be made.
Not everyone is able to pay out thousands of dollars to cover an emergency repair or replacement. According to The Guardian, nearly 80% of Americans live from paycheck to paycheck. As a result, 40% can’t handle a $400 emergency.
Home warranties offer peace of mind in exchange for a reasonable monthly payment. The cheapest policies cost less than $200 per year – however, this doesn’t necessarily mean they are the best deal. In this post, we’ll arm you with the knowledge you’ll need to choose the cheapest plans available for 2019.
Sometimes, you get what you pay for
On paper, it looks like a steal of a deal. Full coverage of home systems for $20/month – why would you pay more than that? While good value for money certainly exists in the home warranty industry, there is often a catch to lower cost plans.
Higher deductibles are one of the biggest trade-offs. Frequently, you’ll find that lower cost home warranty plans have service fees (aka deductibles) that cost $100 or more. If you end up having frequent repair/replacement issues, these rates can quickly erase the savings of a cheaper plan.
If a busted appliance is beyond repair, compensation is often offered to replace it. Here’s the problem if you’re on a cheaper plan – if your top of the line refrigerator bites the dust, you may be only be offered enough money to purchase a basic model.
Finally, lower cost plans may mean the repairperson sent to your home may be from less reputable companies. These firms may cut corners, pay their employees less, or have a busy schedule – all could factor into a substandard repair, which could lead to another service call just a few months later.
Cheap doesn’t necessarily mean substandard
Most substandard home warranties are cheap, but not all cheap home warranties are substandard. If you want to get a great deal, you’ll need to do your research. The cheapest home warranty package for many companies tend to be similar in price.
For instance, Total Home Protection and America’s 1st Choice both charge $29 per month for their basic plan. However, these packages cover different appliances and systems – Total Home Protection offers systems coverage for plumbing, electrical, water heaters, and a limited range of appliances, while America’s 1st Choice only covers heating, air conditioning, and water heaters.
While the fine print may uncover exclusions of which you should be aware, it is clear that Total Home Protection is an excellent value at $29/month. Combined with the consistently great reviews it gets from critic websites and consumers, and it is a great value for homeowners on a budget.
How to pick a great value home warranty plan
Nobody wants to pay more than they have to for things like insurance. So, how can you spot a quality, value-priced home warranty?
First, be sure to find and bookmark home warranty review sites. These websites have made the task of shopping for home warranties much easier – they have pulled and organized all the data needed to make an informed decision in one convenient spot.
When you are researching home warranty companies, always read the fine print. In the terms and conditions, you’ll find exclusions, limitations, caps on repair costs, and more. Terms can differ greatly from one company to another – for example, Select Home Warranty covers heating repairs up to $2,000, while Choice Home Warranty has a cap of $1,500. Select offers optional coverage for refrigerators up to $400, while Choice doesn’t cover them at all.
Limitations and exclusions should be communicated in clear terms. If a company uses vague, complex language, don’t sign an agreement, as this is used by shady companies to avoid paying legitimate claims.
Lastly, before signing any contract, ensure that your company employs fully licensed and insured repairpersons. If unexpected damage or an injury occurs, you may be left holding the bag if they don’t have the necessary coverage.
Other things to watch for when choosing a home warranty
Heeding the advice in this article can help you get a great deal. However, there are other things you should bear in mind when shopping for a home warranty.
First, be aware that many home warranties automatically renew. This makes life easy if you are satisfied with your company – however, if they have not met your expectations, forgetting about renewal dates means you could be stuck with a substandard plan for another year.
Second, many home warranty agreements have preexisting condition clauses. If you buy a pre-owned home with improperly maintained systems and appliances, repair claims may be denied.
Finally, understand that the home warranty industry is loosely regulated in many states. There are no federal laws on the books concerning home warranty companies – this matter has been left completely to the states. As a result, many companies do not operate in states like New York, Washington, and California, as these jurisdictions have strong consumer protection laws.
Home warranty firms aren’t federally regulated to ensure consumer protection or financial stability. This has led to the rise of a number of ‘fly-by-night’ companies – to protect yourself, read consumer reviews extensively and every line of fine print in your agreement before signing it.
Hope is not a home maintenance strategy
‘Pay me now or pay me (more) later’ – this saying of car mechanics applies as readily to home maintenance as it does to vehicle maintenance. Hoping nothing major will happen to your appliances, heating system, or plumbing won’t save you from their enormous costs when they do happen.
Yes, some cheap plans are disappointing in their scope. However, others offer excellent value – by checking review sites, though, it is easier than ever to find a plan that fits your budget.