When Mr. FAF and I bought our first home, it came with a $459 home warranty plan purchased by the seller. By then we had never heard of or understood what it was.
“How is it different from home insurance?” We asked ourselves and our realtor, who explained that it was mainly for home appliances, including the HVAC (heater/AC). Whenever we have need a repair, we can call the home warranty company who will then contact one of their contractors.
When the contractor comes, we pay them a deductible of $100. Any other fee that goes beyond $100 will be paid for by the home warranty company. We thought it sounded like a good deal. Even if it didn’t, we didn’t have to pay for it, so we didn’t really give it much thought.
Our realtor highly recommended we renew the plan when the current one expired after a year. We nodded our heads and moved on with our lives until one day.
An outlet in the kitchen got burned, emitting black smoke around it. We freaked out and frantically contacted our realtor to ask about the home warranty plan and how to use it. She sent us a copy of the home warranty and provided a number for us to call.
The electrician came to fix the problem, and we paid him $100. It was the first time ever we had had to pay for home maintenance. I felt like I died a little bit inside. It was almost half a month’s worth of my groceries at the time. But we had no choice.
We all want a home free of problems.
It was all fine until the 2nd incident which made me doubt the value of the home warranty plan.
One day I came home to a kitchen floor soaking in water. Mr. FAF didn’t know how to fix it, and he was in another city.
Not wanting to spend $100 on a plumber, I turned to Youtube but couldn’t find out what the problem was. One video said the pipe was leaking. But it seemed so complicated, I decided to call the home warranty company.
Alas, a plumber came at 5:30 PM. He looked at the sink and said the faucet was broken and needed to be replaced. But it was already late, so he would need to come back the next day.
He said we needed to pay him $100 at the time and another $100 the next day to replace the broken faucet. We asked if the company covered a new faucet. He said no and suggested we buy a new faucet ourselves since it’d cost more if he had to buy it.
Distressed about paying for the plumber’s two separate visits to fix one problem, we went to Home Depot and decided to buy a good kitchen faucet for $235 which came with a 5-year warranty.
In total, it cost us $435 to have the faucet replaced. The home warranty didn’t help at all. The plumber and the electrician in incident #1 said if we called them directly, we’d need to pay $100, the same amount we paid with the warranty.
After some similar incidents when the company barely paid anything extra to cover the cost beyond the $100 that we paid, I decided to do some research online to see what other people say.
The results are mixed. Home warranty companies for sure say their plans can help save money. However, many articles advise people to think carefully about the age of their home, whether it has a lot of existing problems, and beware the policies that refuse to cover certain claims.
Many articles advise homeowners to save the money they’d spend on home warranty (~$500/year) and put it in a maintenance fund to cover unexpected repairs.
Mr. FAF and I visited this issue many times. What made us eventually decide not to renew the home warranty plan was a more than $100 increase in price from $459 to $575 for renewal.
After all, we’d still have to pay $100 for someone to come fix the problem on top of the $575/year. It’s just not worth it, especially considering our HVAC is only 9 years old and have hopefully almost 10 more years to go.
Over those 10 years, instead of paying the home warranty company, I can put $575-$700 (with annual increases) in the maintenance fund and have $$5,750-$7,000 to pay for a new HVAC.
We’re only 3 months into the second year without home warranty. We haven’t had any issues yet. I will keep tabs on all the maintenance expenses to see how we’re doing without a home warranty plan. So far, we’re happy with our decision to not renew the plan.