If you happen to have a home warranty covering breakdowns in your air conditioning or plumbing leaks or electrical short circuits that you haven't used in a while, now may be a good time to call them up to make sure they answer the phone.
In the past few months, two home warranty companies have slipped out of business, leaving their customers out of luck with a broken appliance and out of an annual premium as well. United Home Warranty, based in Oakhurst, N.J., shut down overnight and disconnected its phones in March. U.A. Durr, a Metairie, La. warranty company closed its doors shortly after, blaming the lackluster real estate market for slumping warranty sales.
Traditionally, homeowners are first introduced to home warranties when they buy a property. It's common for a seller to throw in a warranty covering the basic home systems like plumbing, electrical and HVAC. At a cost of $350 to $700 depending on the level and length of coverage and the charge for a service call, warranties are usually considered cheap insurance for everyone in the transaction.
The Trouble With Problems
With homes taking longer to sell and spending more time vacant, a warranty can be a buyer's best friend. Problems can often occur when the plumbing/electrical systems are stressed with new owners after being unused for months. Facing a big repair even before you've thrown out the moving boxes can put a big damper on the new-home experience.
"Today, everyone's cash-strapped when they buy," said Jon Coile of Champion Realty in Severna Park, Md. "From a realtor's point of view, you don't want to sell someone a house and see them start having all kinds of problems with it, so the warranty makes sense."
Until fairly recently, most warranty companies marketed their contracts exclusively to realtors who made the recommendation of which warranty to buy. Other companies, such as American Home Shield, market their warranties to existing homeowners and provide services such as monthly billing. Homeowners generally have an option at the end of the annual contract to renew it.
How They Work, or Don't
Using a warranty is simple -- or at least it should be. Rather than calling a plumber at random when the tub refuses to drain, you call the company, which in turn calls a tradesperson they have contracted to work in your area, who then calls you to make an appointment. This works fine if you can use another tub in the house for a few days until all the calls have been made and the appointment set.
In an emergency situation, most warranty firms will work to prioritize your claim, but in some cases, such as if your air conditioning shuts down during a sweltering, state-wide heat wave, you may not have a choice but to wait it out.
Depending on your policy, the service call could range from being free to $75, and any charge beyond that is covered by the warranty company.
One troubling aspect of using a home warranty is you have no control over which contractors are used by the company. The friendly, talented electrician who fixed your ceiling fan last month may be replaced by a shady character who keeps eyeing your golf clubs as he repairs your garage door opener.
Another issue that can come up is the "replacement value" of an item. Many warranty contracts allow the company to offer, in case an item cannot be fixed, a check to you to buy a new appliance. However, there are many Better Business Bureau complaints that the amount offered will not buy a comparable appliance.
So what do you do if you've got a dispute with your home warranty company? If it's the policy you've had since you bought the home, hit them at their source. Talk to the real estate agent who sold you the property.
"In our case, we only sell the warranties of one company and we deliver them 500 or more new clients a year," said Coile. "If a past client comes to us and says the warranty is giving them problems, I'm on the phone with the warranty company the next minute. We don't want our reputation affected by their service."
If you've bought the warranty on your own and you're not satisfied, try your state consumer affairs department and department of insurance. "A good warranty company will work with you and will have a process where you can appeal to someone higher up," said Coile. "Those that don't are probably the ones that won't be around much longer."