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As someone who is very busy, and not very handy, I like the idea of getting a warranty so that I know that all I have to do is call someone when something breaks, and I know in advance how much it will cost.

But, I'm skeptical. The sites have very little information. Is it generally the kind of thing where there are so many exclusions that you end up paying for a lot of repairs anyway? Or does it end up being a lot of hassle with paperwork and scheduling preferred service providers and such?

Does anyone have any experience with this or recommendations?

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I don't think there is a real answer to this. Warranty's will vary by location, and everyone seems to have a different experience with them. –  Steven Apr 23 '12 at 19:55
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closed as not constructive by Steven, Tester101, shirlock homes, ChrisF Apr 24 '12 at 11:58

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4 Answers

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Depends on who's paying for it. When you buy a home, you can often get the seller to cover a 1- or 2-year home warranty for the basics (structure, roof, plumbing, HVAC). This is usually insurance as much for the seller as the buyer; if something goes wrong that the seller and home inspector thought were fine, the buyer (who must now fix the problem as they've closed on the house) can call on the home warranty, pay the $100 deductible or whatever, and the problem will be fixed. This dramatically reduces the incidence of lawsuits after closure; actual damages no longer include the real cost to fix the problem (which can be in the tens of thousands for something big like rotting timbers in the attic due to a leak).

As far as you as a homeowner buying a warranty for your own home, this is basically supplemental homeowner's insurance, and you should treat it as such.

The thing to remember with any insurance is that it is a bet; in fact, the field of probability mathematics was originally developed for underwriters, not casinos. By buying the policy for X dollars, you are "betting" the insurance company that some catastrophe will befall your home, for which they will offer a payout up to and including Y dollars (usually for a total loss requiring the house to be rebuilt). In the case of home warranty, they generally have more individualized limits on payout and more limited coverage, but the idea is the same. These "bets", just like bets against the house in a casino game, are rigged in favor of the insurance company; the "paid odds" (ratio of payoff to policy cost per year) is less than the "true odds" (ratio of probability against versus probability for) that your house will be totalled. Supplemental insurance is less tightly controlled by regulation, since you aren't required to have it (unlike basic home insurance, which under certain mortgage contracts you are often required to have), which means in the long-term, general case, it's a pretty significant losing bet.

However, you can "beat the house" at this game by having a better understanding of when things are more likely to happen than the insurance company's "general-case" calculation. If your hot water heater is over 30 years old, and you don't have to tell them that so they can figure it into their price, then odds are you will need to replace it (on their dollar) before they can break even on your policy premiums. If the policy covers replacement prior to total failure, it's a pretty sure thing for you. Same with roof repair; almost nobody pays for a new roof themselves, they just wait for the next hailstorm after the 20- or 30-year rated life of the roof has passed, and pay the insurance deductible for the (overall much more expensive) reshingling and/or resheathing job.

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Thanks for the answer. I understand the math -- it's more a question of whether the main companies that offer such policies have a reputation for actually fixing/replacing things as needed, or for constantly finding technical loopholes/exclusions so that claims a normal homeowner would think are reasonable are denied. –  Jand Apr 23 '12 at 20:22
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We recently used our home warranty to call out an HVAC tech to take a look at a heater costing us $400/mo to freeze. It cost us $60 for the visit as per the agreement, but unfortunately for this question the tech didn't have to replace anything, so I can't tell you if the warranty actually saved us any money or if the service call price simply coincided with the warranty deductible. –  KeithS Apr 23 '12 at 20:27
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As for loopholes, etc, you should be able to get full documentation. Read it cover-to-cover. In our case they gave us a digest, saying what they would and wouldn't cover with regards to various areas of the home. For instance, if the HVAC quit, the warranty would recover repair or replacement of the unit itself by a qualified technician, freon recharge, etc, but would not cover ductwork repair/replacement. If the roof had to be replaced due to damage they'd cover it, but not the rain gutters. Of course they had higher coverage levels including these things... for a price. –  KeithS Apr 23 '12 at 20:33
    
Just keep in mind that typically normal wear-and-tear on your home is not covered and home warranties, in my experience over the years, are simply not worth the money. It's a boondoggle for the warranty companies and makes it appealing to novice home buyers. –  staticx Apr 24 '12 at 12:02
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A few of my home owner friends have these warranties. One is very handy and the others not so much. Even my handy friend has been surprised at the things that were covered by his warranty. A big plus when you just want to go fishing and don't want to install a new hot water heater.

The key is to find a warranty that matches your house. Be sure that the oldest things in your house are covered(roof, appliances, flooring, etc.). If you are not sure if it is cost effective, calculate how much the warranty will cost over, say 10 years. Then get some estimates for the things that are covered by the warranty. The things that you think might have issues in the future. See if the costs balance out.

In the end, your homeowner's insurance is supposed to handle any accidents or disasters. But, as a 10 year veteran in insurance restoration, you would be surprised at the fine print in coverage. It pays to cover your bases.

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There are many exceptions and many variations of policies. My son bought a house and the seller threw in a policy but it excluded the refridgerator and several other things. He had to pay for the fridge when it went out a month after he bought the house. So read the policy.

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It is really hard to answer this question without getting subjective. My home came with a home warranty 6 years ago, but typically they do not cover normal 'wear-and-tear'. Case-in-point: after living there for some time, the air conditioner went out. American HomeShield stated that it was part of normal maintenance to clean the coils - even if I am not trained on how to clean air conditioning coils. So caveat emptor.

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