Home Warranty Policies: Seemingly Great Insurance Can be a Sham

David A. Reinstein, LCSW, Yahoo! Contributor Network
Dec 5, 2007 "Share your voice on Yahoo! websites. Start Here."

Having been a homeowner for more than 15 years, I have had several home warranty plans - the first of which was provided as a perk with the purchase of the home. Then, fear of some major, bank-account-busting repair drove me to renew with one company or another until just recently. If you are thinking about buying one of these things, please think again. Remember, they do not stay in business by paying out expensive claims. Like the TV commercial with David Slade, they make their money by first taking your premiums and then saying "No!"

Although there are more than a half-dozen such plans in most areas, I have had most of my experiences with two of the largest of these firms; Countrywide (the same company that holds the mortgage on my home) and the nationally nefarious AHS (American Home Shield.) They are more alike than they are different. Each writes a policy that looks pretty all-inclusive for home repairs. Plumbing, electrical wiring, furnaces and kitchen appliances. How could you possibly go wrong for about $400. a year (more if you have a swimming pool, spa, etc.) when it appears that your only additional out of pocket expense will be a co-pay of between $35 - $50 for each technician's visit - no matter how much they have to do. The company will pay for the rest. Maybe.

The small print is really small and is often not realized until a service request is denied. Frequent causes for denial, justified in that tinier than tiny print, include issues like 1) something was installed incorrectly - possibly some wiring or plumbing twenty or thirty years ago. When/if it fails OR is connect with anything that fails, the claim will be denied.

Most of the contractors that work with these companies are not the well established and well trained people you would hope for. More often than not, they are people new to their work, trying to be as busy as possible and willing to work for considerable less than a privately hired contractor would charge. The warranty companies also predetermine what parts can be used to fix something. This becomes important when your furnace needs replacement, and the one they have purchased hundreds of that the contractors MUST use is frequently junk.

If any part of the problem involves any piece of piping, wiring or woodwork that lays outside of the perimeter of the foundation of your home, they have yet another 'fine print' way out of taking care of you.

I could give a good many more examples from both my own experiences and those of others. To expect to have every possible thing that might go wrong with the things in your home for $400 a year may be just a tad unrealistic. Some years, you may not need it at all and feel that you have wasted the money on the premium. Then a year comes along when you 'win' by having them fix something that you figure costs more than you have paid them. It's like the House in a casino: In the long run, in every imaginable instance, it is THEIR house that wins, not yours.

If you are considering a home warranty policy, read is very carefully. The nicely printed brochures are deliberately designed to make the exceptions and caveats less than obvious. Try to remember - None of these people are in human services - they are in the business of making money. In any insurance enterprise, making money is contingent on taking in more in premiums than they have to pay out. It isn't chance. They have it pretty well figured out and, in the long run, they will win and you will lose.

Caveat Emptor!

Published by David A. Reinstein, LCSW - Featured Contributor in Health & Wellness and Technology

Clinical Social Worker, psychotherapist, born in Boston and a relatively unscathed survivor of the 60's. Fan of technology, guitars, creating music and poetry. Mental wellness coach, staff trainer and parent... View profile

Home Warranty Policies: Seemingly Great Insurance Can be a Sham

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