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Home Warranty Information

Providers of Service Contracts

A "Home Warranty" is a contract for service to repair covered items in your home, if they fail.  These contracts typically run around $300 a year, but can be more, if more items are covered.  Usually, they cover things like plumbing repairs inside the house, hot water heater, air conditioning, furnace, electrical problems and so on.  They can even cover pool equipment, lawn sprinklers, and costs to dispose or cart off broken equipment and costs to upgrade systems that do not meet current code.

Since the coverages vary a great deal from provider to provider, you have to read carefully what is covered and what is not.  Just because air conditioning, for example, is covered does not mean that Freon recycling is, or disposal of replaced compressors, or upgrades to meet new Federal regulations.  Similarly, a hot water heater may accumulate sediment over years and not be eligible for replacement, or it might be covered.

All of them charge something for a serviceman to visit and inspect the problem.  These service call charges range from near zero to $75.  Some allow multiple items to be inspected on a single call — others charge for each item.  The repair is normally done at no additional charge above the service call for covered services, but some services are not covered.

The Texas Real Estate Commission licenses Residential Service Contract (RSC) providers ("Home Warranty" companies). Currently (12/18/2017), there are 44 companies so licensed.

We have buyers who have selected about half of these providers.  While some have fewer complaints, none of them is perfect.  The complaints are typically about whether an item is covered or not.  The contract may seem to read that an item is protected, but the technician says no.  Misunderstandings of coverage are common.  Quibbling about extra charges is also common.

But our opinion of them changes from year to year, as their policies and coverages change.  We tend to favor the ones that we have dealt with in the past and seem to have more reasonable service or policies.

Where does a "Home Warranty" fit in?

Homeowner's insurance is intended to cover, among other things, casualty losses to your home's structure due to events, like fire, perhaps wind, rain, lightning and so on.  It may cover interior items like a stereo lost to thieves or a leak in the roof or from a failed refrigerator.  But even the most comprehensive homeowner's policy doesn't normally cover losses from a flood nor from broken mechanical systems and appliances in the house, like plumbing, electrical and air devices.   

Flood insurance policies are not discussed here and should be researched separately, especially if your property is in a flood zone.  

Air conditioners that fail or garage doors that won't open or water heaters that leak or toilet that don't flush or ovens that stop heating or even refrigerators that stop cooling are all examples of mechanical systems and appliances that are normally not covered by a homeowner's insurance policy, at least today. 

Residential service policies would apply to fixing or replacing the refrigerator that stopped freezing and all the food spoiled.  The RSC would fix or replace the fridge, but not the food.  If the floor were damaged by a leaking water heater, the homeowner's insurance probably will cover that, but not the water heater repair.  Note that, like homeowner's insurance, RSCs have a deductible, too, usually, and have an annual policy premium.  

Is a "Home Warranty" Recommended?

Some RSCs will cover a house with a new contract long after closing (purchase).  Some offer only coverage on homes purchased within 30 days of closing.  The reasoning is that homes are quite often inspected and known problems corrected by the time of closing.  The ones that cover any house usually have a waiting period to exclude pre-existing conditions.

It's like every other investment you make.  You probably won't need coverage on a newly built home and may not need coverage on a home recently inspected, but long term every system in your home will break down or need maintenance.  The question is when.

If you don't need a new air conditioning compressor for almost 7 years and you dutifully pay the $300 for 5 years and then stop a year plus before it fails, how will you feel?  You can't buy a new air conditioning system for $1,800, but maybe you can fix it for $1,000.  Should you have never had coverage and saved the $1,500 or should you have paid the $1,800 and gotten a new upgraded system for $50?  (The extra $300 would have extended the coverage.)

Durable systems, especially air conditioning in Texas, are a good idea.  What is the expected life of a washer, a dryer, a garage door opener, a dishwasher, an icemaker, a fridge, and so on?  Yes, the RSC people have figured out the expected failure rate and priced their services accordingly, but if you're the one with a failure, you'll be glad you're covered.  If your equipment lasts beyond its expected life, you may be disappointed to have spent the money.

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