Warranty companies are the subject of thousands of complaints and negative reviews at consumer agencies and groups such as the Better Business Bureau. According to those complaints, even after paying $400 to $1,000 for the coverage, consumers often find contracts filled with costly exclusions. When Checkbook examined 14 plans from six companies, we found that providers have many ways to reject claims or limit the amount they’ll pay. Worst of all, even if a problem is covered, you don’t get to decide who repairs it.
(Post readers can view all of Checkbook’s ratings of local service providers, including plumbers, roofers, appliance repair services and more, for free until Oct. 30 at Checkbook.org/WashingtonPost/Warranties.)
Examine all the warranty fees
When you have a problem with an appliance or home system, warranty companies promise to dispatch a professional to make things right. If the technician can’t fix it, the company promises to buy a replacement product. Sounds great, but sales pitches can make it seem as if you’ll never pay for a home repair again. It’s not that simple.
If you buy one of these plans, there’s a good chance you’ll pay far more in premiums and service fees and for uncovered repairs than if you skipped the coverage and paid to repair or replace an item yourself.
For most homes, warranty companies charge from $400 to more than $1,000 for the first year of coverage, depending on the company, the plan and where you live. In addition to monthly or annual premiums, you’ll be responsible for a “trade service fee” of about $65 to $125 every time you call for service. (Repairs are done by businesses that warranty companies hire to respond to claims.) Even if the warranty company denies your claim, you still pay the service fee, based on the companies and plans Checkbook examined.
Review the fine print exclusions
Even the most comprehensive plans include long lists of fine print exclusions. Most limit the companies’ financial exposure from items that break often or can be costly to fix or replace. For example, refrigerator ice-makers break down a lot, which is why many plans exclude them. And repairing or replacing heating and plumbing systems can cost thousands of dollars. That’s the reason plans often limit the amount they’ll pay for those items or overall.
Think you’re covered if your roof leaks? Not with three of the six companies Checkbook examined. And you’ll need to check the fine print on complicated items such as water heaters, window air conditioners and solar heating systems. Some companies cover them, some don’t, and some might cover parts of an appliance but not others. One plan Checkbook examined excludes any damage that occurs during your oven’s self-cleaning cycle.
Even for covered repairs, you might find your claim denied if you don’t have records to prove you performed the manufacturer’s recommended maintenance, or if the problem was caused by something other than normal wear and tear, such as a power surge. With most companies, the same goes if the provider determines the problem was caused by a preexisting condition that predated your coverage.
These are just some of the fine print limitations that give providers wide latitude in deciding whether to cover a claim. Based on feedback from our members and the complaints on file with consumer agencies, warranty companies frequently impose them.
How much will the plans cover?
Even when companies cover claims, they often limit the amount they have to pay out. All six companies Checkbook looked at capped the amount they’ll pay for at least some items. (To be clear, this is not a warning against warranties for new homes. The warranties provided by home builders should be comprehensive, cover as many years as you can get and be provided for no extra charge.)
Quality of repairs is often low
Warranty companies boast that their repair contractors are prescreened and do good work, but it is unclear they vet them carefully. No matter who is sent to diagnose your problem — and repair it if covered — they work for the warranty company and not you. Even though the warranty companies select the technicians, the contracts of at least four policy providers we examined say they’re not responsible for the negligence or other conduct of the workers they dispatch. Plus based on the feedback we get from homeowners and complaints filed with consumer agencies, there’s much reason to be concerned that these workers often do lousy work.
Consumer agencies receive thousands of complaints each year about warranty providers. Common gripes include claims being denied, repairs being performed incorrectly, and repairs taking days or weeks to schedule or complete. Consumers reported that just reaching a customer service representative sometimes required waiting on hold for an hour or more. Some complained that if a covered item couldn’t be fixed, the company refused to pay the entire cost of replacing it and sometimes offered only the wholesale price.
Checkbook’s advice is to skip buying a home warranty and be prepared to pay for repairing or replacing your appliances or home systems yourself. Overall, avoiding a home warranty will save you money and let you decide the best way to address breakdowns.
For costly issues, such as replacing your heating system or roof, self-insure by maintaining a well-funded savings account or a dedicated product repair or replacement fund. Many contractors also offer payment plans, but make sure any interest rates are fair.
Home sellers often offer to purchase home warranties for buyers to allay anxieties about possible problems. Instead of accepting one of these policies, find out how much the coverage costs and ask the seller to give you a credit for that amount at closing. You can then use those funds to help cover any future problems avoiding a warranty’s exclusions, service charges and other headaches.
If you still want to buy a warranty, read the contract carefully. Determine exactly what is and isn’t covered, any limits on the amounts the company will pay, and the fee you’ll be charged whenever you call for service. And check out its complaint history with local consumer agencies.
Kevin Brasler and Anthony Giorgianni, respectively, are executive editor and contributing editor at Washington Consumers’ Checkbook magazine and Checkbook.org, which is a nonprofit organization with a mission to help consumers get the best service and lowest prices. It is supported by consumers and takes no money from the service providers it evaluates. You can access all of Washington Consumers’ Checkbook’s ratings and advice until Oct. 30 at Checkbook.org/WashingtonPost/Warranties.