We purchased our current home a little over a year ago and one of the perks to entice potential buyers was an included third party home warranty purchased by the seller. I have to admit, when buying an older home, it sure does ease your concerns about the home falling apart right after you close.

A home warranty plan is simply insurance you can buy against sudden and accidental breakdown. Typical coverage is for the mechanical systems of your home such as electrical, plumbing, furnace, and hot water heater. Our plan included a few extras such as our appliances, central air, pool pump and filter. Our plan would cover the cost of repair or replacement minus a seventy five dollar fee which is paid at the time of repair. Structural repairs such as our roof were not covered. Companies and plans vary so do your homework if you’re considering buying a plan for your home.

Home protection plans are not replacements for home owner’s insurance, it’s just an extra piece of mind. Don’t skip having the home you are planning to buy inspected because it includes such a policy. Always hire a licensed professional inspector to look the place over.

So, are they worth the money? In my personal example, even if I had purchased the plan with my own money I would have came out far ahead financially. In fact, we renewed our policy at my expense without hesitation. Shorty after we moved in we lost electricity in two rooms. Our bathtub in the second bathroom started leaking behind the wall. We purchased the home in the winter and in late spring when we opened the pool we discovered the sand filtration system was shot. Those three items combined cost me $225 ($75 x 3 occurrences). Our home warranty plan paid over $3000 for the repairs and a new pool filter.

As you can see, we saved in that situation. I renewed the plan for another year because the alternative would be to use a credit card when something major breaks and that’s not a plan at all. Ideally you would have an emergency fund building interest somewhere but until you have that established a home warranty might just be the answer. We even added the washer and dryer to this year’s plan.

Tip: Even though we knew we would renew, we made them work at selling it. We ended up with a free upgrade with a lowered initial repair fee of $40 rather than the $75.

The bottom line is how much risk you’re willing to take. You can save $250 to $500 a year by skipping the home warranty if you’re a gambler. It is a large expense, especially if you believe the risks are low due to the condition of your home. How do I see it? If my 20 year old furnace or my 50 gallon hot water heater goes out, I’m going to be very happy to write that $40 check to have it repaired or replaced. If nothing at all happens I’m still ahead and I didn’t have to worry about it for a year. If my home were newer and everything was under five years old, I’d probably take the $500 and get that emergency fund started.

Since your home is most likely one of your biggest investments, unexpected repair or replacement costs can easily strain your budget if you do not have a warranty.  Additionally, finding an approved and insured contractor to solve your problem can be stressful and inconvenient, especially at that crucial moment when a system breaks down.  While a home warranty cannot prevent systems or appliances from breaking down, it can help make covered repairs or replacement easier and less costly.

While not everything is covered, coverage for many of the most frequently occurring breakdowns of home system components and appliances is actually included.  Applicants should review their contracts or sample contracts carefully, to confirm covered items, terms and conditions, limitations and exclusions.  In some cases “supplemental” home warranty coverage may also be necessary, for items such as swimming pools and their filter / pump systems, garage door openers, secondary appliances (i.e. a deep freezer that is not the primary appliance), etc.

Whenever you apply for a mortgage loan, most lenders require that you have proof of insurance on your home before they will allow the closing to take place.  Very often, what homeowners feel is covered by their home owners insurance policy, is not included in their policy.  A home warranty can be very useful in this respect.  Carefully reviewing your homeowners insurance policy and comparing it to a home warranty, and then adjusting each to be complimentary to the other, can give a homeowner REAL peace of mind knowing that they are in fact fully covered for any event that may come their way.

If you have a seller’s home warranty (a type of home warranty provided by the seller to help promote the sale of the property), once the sale closes, any problems that may occur in the home will be covered.  Any expensive repair the home may require, will be taken care of by the home warranty.  A homeowners insurance policy will not likely cover many kinds of problems which will occur from time to time, nor will it cover wear and tear on home systems.

Unless you’re carpenter or contractor by trade, a home warranty is a great investment.  In most cases you will recover your modest investment in the home warranty plan via replacement of home systems and appliances, which will all eventually fail and need to be repaired or replaced.  The best advice is to check around and compare home warranty coverage and rates.  Both quarterly and monthly payment plans for are available, and the internet is a great resource to begin your home warranty search.

Troubleshooter: Long hot summer

WTDV Raleigh Durahm

FAYETTEVILLE (WTVD) — Recently it was 80 degrees inside Lisa Williams’ home, and she considers that a cool temperature.

She says she’s been without a working home air conditioner unit since spring. She tells Troubleshooter Diane Wilson, “I was awful. I was miserable.”

She has a home warranty through American Home Shield and she says a technician was sent out to look at the unit. She adds, “They started taking the unit out and then stopped as they said they didn’t have approval to do the work.”

So Lisa waited for American Home Shield to approve the work. But Lisa says AHS didn’t approve the work instead she says, “They said they would not pay for everything. They would have to send me a check. I would have to take the cash out option which left me with nothing, as the unit is halfway pulled out, and no air no heat, no nothing.”

Lisa used ceiling fans and window units to keep cool. She also says she heard nothing from American Home Shield. She adds, “I kept calling in and said if you’re going to send me cash how much? When are you going to send it and they never even called me back.” So Lisa turned to Troubleshooter Diane Wilson.

Troubleshooter Diane Wilson got in touch with AHS and Lisa got some cool news. She says, “AHS contacted me immediately and they said they would pay for everything.” Lisa is sitting cool now as she has a whole new working unit and she’s very happy with the response from AHS.

In a statement a rep for American Home Shield added this: American Home Shield is committed to providing quality customer service. Ms. Williams’ recent experience was not representative of the normal AHS customer experience and we sincerely regret the delays in service she experienced.

As a result, AHS covered 100% of the expense related to the replacement and installation of her new furnace and evaporative coil, including $1,200 toward items that would not normally have been covered under the terms of her warranty.

The company also reimbursed Ms. Williams for her trade service fee and AC window units, used to cool the home in the interim. Ms. Williams has confirmed that she is pleased with the outcome.

As part of the company’s business model, AHS contracts with local trade professionals to handle our customers’ service requests. AHS prides itself in providing reliable service from pre-screened, insured contractors…..(more)