Understanding the Facts about Home Warranties

Every product nowadays comes with a warranty, be it a toaster, an iPod, or a computer. Some last a long time, others a few weeks. Some can be extended if you buy the product with the right credit card, others can be canceled halfway through if you do something wrong. But who would have thought that a home can come with a warranty? Well, if you thought homes do not come with warranties, you were right. A home warranty is not a warranty for your home. That would be homeowners insurance. A home warranty might more accurately be described as “in home appliance insurance,” as the payment method (an annual check in the range of $500) resembles insurance far more than it does a warranty of any sort.

The insurance, in this case, is specifically for (in most cases) the dishwasher, the plumbing, the electrical wiring, and similar non-structural features of the house. Normally, your policy will outline in detail what exactly is covered (plumbing that degrades due to wear and tear normally is, plumbing that breaks because your kid poured dirt down the sink probably is not), and like in most industries, the majority of home warranty sellers are honest, upstanding businessmen with reputations to look out for.

Of course, like in the health insurance industry, there is some amount of fraud – particularly perpetrated against the working poor and the lower middle class, who are often not educated in the intricacies of contract law, and are not wealthy enough to afford home warranties offered by legitimate vendors. The most common complaints among the owners of home warranties are the same as those about health care. The big complaints are that the warranty provider will claim, verbally, that a particular problem is covered, but when the person actually asks for compensation when that problem occurs, the provider whips out a contract that says otherwise. Another complaint is that the warranty provider will claim that the warranty holder has a “pre-existing condition,” i.e. that the warranty holder bought the house in the damage condition, and that because the problem existed when the home warranty was purchased, it is not covered. A third, and far more serious complaint, is that often the provider will simply disappear with the warranty holder’s money, dissolving his company, and then later reappearing with a new name and a new logo, peddling the exact same nonexistent service.