Home Warranties – To renew or not to renew?
By J. Money
J. Money writes for BudgetsAreSexy.com – A laid back finance blog of a guy just trying to spice things up a bit. He also finds budgets….well…sexy! You can sign up to his feed here if you like what you see here 🙂
We nibble on this question every single year, and it seems that I still don’t have a 100% sure answer on it 😉 Mrs. Budgetsaresexy and I had already agreed that we should NOT renew our home warranty this year, thus letting the expiration date come and go, but they JUST sent us another friendly reminder – sneaky marketers!
It’s hard because I usually go w/ my original instinct, which in this case says to renew it and have the peace of mind that comes along w/ warranties. But then the practical side kicks in and asks, “Will you actually recoup the costs?” I mean, it’s a valid question and one to definitely consider for things like this.
Last year it costs us $360, and we used it once for our leaky ceiling ordeal. While we tried to use it another time when our dryer went bonkers, we didn’t, and all in all we ended up spending a total of $460 (warranty itself + $100 deductible) for this one plumbing issue. Now, i’m not sure how much the actual costs would have been w/out the warranty, but i seriously doubt it would have come close. All they really put in was some new rubbery stopper thingie and told us what to watch for.
This year the warranty was renewing at $465! Same deductibles, and same coverage (quoted from their site):
“breakdowns in major systems like plumbing, electrical, heating and air
conditioning as well as washer, dryer, oven, refrigerator and other items.”
So what’s a brother to do, right? If 3 things happen (or 1 major thing), we’re pretty much covered. But realistically we’d be spending money “in hopes” something happens, and then shelling out another $100 each time it DOES. I dunno, it really just gives me a headache thinking of it all 😉
With our recent hospital payments coming up, and sites out there like Craigslist & eBay to pick up new appliances, we have decided to pass (again) and keep this money in our Emergency Fund.
What would you guys do, though? Does anyone else use a home warranty of any sort? I’d be interested to see how others handle this little ditty…and fingers crossed that nothing crazy comes up!
I completely agree with your decision NOT to renew.
The realtor selling our house offered a warranty, and it isn’t worth anything. I realize they vary from policy to policy, but the likelihood that three covered events would happen in one year is pretty high.
Our roof had a hole in it we were not aware of (purchased in the winter, 2 story, snow on it, inspector could not see the hole due to the snow). There was no doubt it was there when we purchased. But our home warranty was going to charge $150 just to send someone out, then they would only pay up to $350 for repairs. An independent estimate suggested the repair would cost, at minimum, $700. We went through our own estimates and had it done without calling warranty people. Who’s to say they will be the cheapest, another contractor bid over $1,000, which if they were chosen by the warranty would have eaten up the amount paid by the warranty firm.
Just try to put money away for repairs and replacements. good idea.
We’ve renewed our warranty twice now at just under $500 for the year because things just keep happening in a 60-year-old house. First the 2-year-old refrigerator died and they spent $1,200 in parts and labor to fix it once all was said and done. It would have been more convenient to replace it, but either way, it paid for itself that year.
And then this past year the motor in our clothes dryer stopped working and they replaced it. I think the estimate was at least $500 in parts and labor.
Our boiler is also going on 30 years old, so we’re just renewing it and considering it a kind of insurance. Just in case! Probably not the smartest thing to do, but the peace of mind has been worth it.
We just went through the same decision, and didn’t renew–they had raised the annual premium and the cost of a service visit quite considerably. While we don’t really have a big emergency fund, all the major systems in our house are pretty new, and we decided to gamble. It expired Oct. 31 and incidentally, our thermostat is stuck at 66 degrees, so the HVAC person is coming out today. Fingers crossed we made the right decision. I posted about how we made the decision on my blog–check it out if you’re interested!
Thx for all the info!!! It’s def. a hard one, that’s for sure 😉 If only we could look into a crystal ball, eh?
@Michelle – SUCKS about that hole…the odds? We bought our townhouse in the summer, and the inspector DID find issues up there (thank goodness). The sellers replaced the whole roof for us, which was about the only GOOD thing about us buying right as home prices were going down the toilet…
@Karen – I think that’s smart in your case w/ the old house 🙂 ours is 20 years old and for the most part pretty okay. we’ve actually gone through 2 dryers ourselves in 2 years, but Craigslist hooked us up super cheap, so that worked out.
@Thankful – OH man, i surely hope so!!! I’ll send over a prayer for ya.
For us our emergency fund really only has 2 purposes… if one or both of us lose our jobs, and if there is a large medical bill. So I recommend setting up a fund separate from your general emergency fund for house maintenance and repairs… funnel about $50 a month into it (or more) and when something happens you have that money there.
We built a new home and have had 1 such emergency in 4 years, the water heater stopped working, so take into account the age of your home too.
@Jerry, no, it’s not the same. A home warranty is like the extended warranty on your car. You pay extra for it and it covers things that go wrong inside your house. Home insurance protects you from things like fire, theft, flood damage, etc, much like car insurance.
@J. Money: Your good wishes must have helped–the HVAC guy fiddled with the circuit board in the furnace, apparently the fan wasn’t turning on. We’re back up and running now, with the only costs being a service visit fee, and probably a higher gas bill for this month since the furnace was producing heat that couldn’t be properly distributed. Good luck with your decision!
I have the home warranty that I got for the first year after buying the house. So far I have not used it,and I doubt that I will renew it, I just don’t see the value. The things they push are like getting your a/c checked and such, and I have coupons to do it for less than their fee to have someone come out.
I am about to need a new water heater, but I would just assume pick the one that I want, not have them pick the cheapest one they can get and then I am stuck with a crappy water heater.
I would lump these in with extended warranties on stuff you buy at the store, and I don’t ever buy those either. They also have written in many different ways they can get out of paying anything at all to you even if something does happen, it seems closer to a scam to me.
My wife and I chose to renew our home warranty after it expired and we are so glad we did. We took stock of the possible things that could go wrong and it just made sense, for us, to renew. I suggest you do the same, as it will most likely end up saving you a lot of money in the long run.