What you should know before buying or using a Home Warranty Company
Home sellers often offer a home warranty to the buyer as an extra incentive because they can be easily acquired and provide buyers with added peace of mind when making a large purchase.
Home warranties are “supposed” to cover any repairs your home will need over the term of the warranty policy and they are “supposed” to protect buyers from unexpected expenses that may arise such as: a malfunctioning dishwasher, roof leaks, plumbing issues, HVAC issues, etc. This is how it is “supposed” to work, but this is not usually the case.
When I first started my company I (like many other contractors just starting) thought any work was work I wanted, so I took on anything and everything. I signed up with six different home warranty companies. After six months I quit all six the same day. This is why:
Home Warranty Companies pay way below industry standard for services; this causes myriad issues. Contractors will catch the warranty calls last, in favor of their higher-paying regular clients. A contractor cannot make a living with what warranty companies pay, so this encourages price gouging on the items the warranty does not cover. The warranty companies strongly encourage the contractors to find reasons to not cover the claim; this allows them to get out of coverage and gives the contractor an opening to sell repairs themselves at inflated rates.
As a result of the low pay provided to contractors by the warranty companies and very little vetting, you will generally get one of four types of contractors:
The New Guy – The brand new contractor that is just starting out and doesn’t yet know what they are getting into (this is the one you want). They haven’t been corrupted yet and want to do good work and make you happy.
The Veteran – This is the contractor that has been with the home warranty company for many years, knows how to play the game and how to make serious money by billing the warranty company for his work in addition to billing the customer inflated prices for uncovered items. This is double-dipping...win/win for the contractor and the loser is the client.
The Train Wreck – This is the guy that has absolutely no customer service skills and has been fired from every other company in the area. Without warranty work, he would not be working. Not the guy you want working on anything in your house.
The Hunter – I call this contractor “the hunter” cause he doesn’t really need to work. He has his own business but really only works to support a few hobbies, and hunting is usually one. He makes enough to supplement his spouse’s income and probably works six months out of the year. He will say he will be at your place Tuesday, but is it this Tuesday or next?
When I worked for the warranty companies, my calls typically went like this: they would give me a service call, upon arrival I had to diagnose the issue and then call in to the warranty company to get approval on whatever needed to be done. Calling in took between 30 and 40 minutes. I did not get paid for the travel or the time on the phone. If another issue arose during the repair I had to call in again (another 30 to 40 minutes and I was also chastised for not finding this issue the first time, even though the second issue was not apparent until the first repair had been done) and get approval. Anything not approved would not be paid. If the paperwork had any mistakes, I would not get paid. During the call, they would ask a bevy of questions looking for any excuse to deny the claim. If they did have one they felt was valid, they would tell me to collect the copay and leave without giving the client an explanation. They would call the client 10 to 15 minutes later and tell them that the warranty that they have paid for over the past however many years is not going to cover them. The client would then often blame me for the denial. The low pay, extremely poor customer service and fraudulent promises of security is what made me stop working for them. I did not go into business to become a vehicle to scam others.
If you already have a Home Warranty in place, here are some things you can do to increase your odds of getting needed HVAC repairs covered:
Before you call for service, make sure the air filters have been changed, make sure the outdoor unit is clear of debris, make sure all of your vents are open and your return has plenty of access to pull in air (no couches or furniture in front of the return). Any of these things can be used as a reason to deny a claim; they will call it “differed maintenance” or “abuse”.
When the contractor arrives, pay attention. Ask questions and take notes. If you get a bad feeling about the contractor (like they might be shady) make them leave and immediately call your warranty company to get a new contractor. Treat them like rental cars, if you don’t like them, get another. Your “little voice” is probably yelling at you for a reason.
Be nice at first. When you call the warranty company, be polite but do not volunteer a lot of information other than “It’s broke”. If you tried to repair it yourself earlier, or if a friend already diagnosed the issue or you tell them or you heard a noise a few weeks ago and didn’t call in, they will use any of these statements to deny the claim.
Your claim was denied…now what? The verbiage in the contract is written so they can literally deny anything, for any reason at any time. This can still be overcome if you put in some work. Call them, call them a lot, multiple times per day. Don’t be afraid to be aggressive, all you need to repeat is “I bought a warranty! Fix it!”. Make them cringe every time your name comes up. The phrase “The squeaky wheel gets the grease” could not be more true in this instance. If they won’t fix it, get anyone and everything you can think of involved. Use social media, go to their Facebook page, Twitter page, LinkedIn, everywhere. Contact your realtor who helped you buy the home; they can often contact their home warranty rep. If you have to, don’t be afraid to contact a lawyer, assuming the repair is large enough to justify it. Basically the bigger mess you can create for them, the more likely they will either offer to buy you out or repair your issue.
Home Warranty companies only care about their yearly expenditure. They will spend $2,000 to fix a system that would only cost $3,500 to replace. All they care about is their numbers, not you. Having said all of this, some people actually do get results with their Home Warranty companies. I have had a few clients get their entire systems replaced for only a copay, but they are the minority of cases. In my experience, 95% of the people completely get shafted. The other 5%, because of the work they put in and how they handled the situation or for some just because they “knew people,” they will make out fine.
Buying a home warranty is NOT insurance, or even a safety net, as they market it. It is a substandard product that yields lackluster results while giving buyers a false sense of security. You are better off to open a savings account for home emergencies and keep it funded. Then when something does go wrong, not only are you prepared to pay for it, but you are in control, not some nameless cubical warrior whose sole purpose is to limit the services you already paid for.
My best advice is to forego the home warranty. Instead, use that money to hire a quality home inspector, then get an HVAC inspection, a plumbing inspection, an electrical inspection and a roof inspection; and be there for these inspections, ask questions, lots of questions. With all of these professionals at your disposal, you can then make an educated decision about the potential pitfalls of your new purchase. Then proceed with cautious optimism knowing that you made your decision based on the best possible guidance available. Use the knowledge and connections of your realtor, they can be a valuable resource not only for buying your home but for maintaining it afterwards.
As with all of my blogs, this information is strictly my opinion based on my 23 years of experience in the HVAC industry. Your experience may vary.