Beware: These often aren’t worth the cost — or effort

Home warranty companies run lots of ads promising to save you thousands of dollars when something goes wrong with your refrigerator, furnace, plumbing, and other appliances and systems. But don’t count on the peace of mind these plans promise. These warranties are terrible deals and simply aren’t worth the price or the hassle.

These plans are the subject of thousands of complaints to consumer agencies each year. American Home Shield, the largest U.S. home warranty company, has been the subject of more than 10,500 customer complaints to the Better Business Bureau during the last three years. Bay Area Consumers’ Checkbook and Checkbook.org took a close look at home warranties and found that, among other things, these insurance plans usually are bad deals for most peo

Editor’s note:

The Chronicle is partnering with Bay Area Consumers’ Checkbook magazine and Checkbook.org, a nonprofit consumer group with a mission to help consumers get the best service and lowest prices. Checkbook is supported by consumers and takes no money from the service providers it evaluates. You can see Checkbook’s full article on home warranties, as well as full access to Checkbook.org until August 5, 2019 at https://www. checkbook.org/CHRONICLE/home-warranties. ple who buy them. For example, the financial filings of the parent company of American Home Shield show that for the nine months ending in September 2018, it reported revenue of $979 million. The cost of providing services to customers was $532 million. That means that customers received about 54 cents in services for every dollar they paid the warranty company.

What’s worse is that the companies sell the idea that once you buy a warranty, you’ll never pay for a home repair again. That’s simply not the case.

To start, a home warranty can cost from $400 to $1,000 for the first year of coverage. In addition to monthly or annual premiums, you’ll be responsible for a “trade service fee” of around $65 to $125 to cover the repair company’s initial visit. Even if the warranty company denies your claim, you still pay the initial service fee.

Checkbook also took a close look at the fine print in home warranties and found alarmingly long lists of exclusions. These gotchas are no accident: They are designed to limit the companies’ financial exposure from things that break often or that can be costly to fix or replace. And based on the large numbers of complaints on file with consumer agencies, warranty companies are all too eager to deny claims. Take your roof — that’s exactly the kind of repair you want to protect yourself from, right? Well, most plans don’t cover roof repair. Nor do most warranties cover your refrigerator’s icemaker, or your water heater that sprung a leak. The same goes if you have trouble with a window air conditioner, heating system humidifier, home security system wiring, or solar heating system. One plan Checkbook examined even excludes any damage that occurs during your oven’s selfcleaning cycle. Even for covered repairs, you might find your claim denied if you don’t have records to prove you performed the manufacturer’s recommended maintenance, or if the problem was caused by something other than normal wear and tear, such as a power surge. Even when these companies actually cover claims, they often limit the amount they have to pay out. For instance, the sample contract Checkbook reviewed for America’s 1st Choice Home Club says the company won’t be liable for more than $500 per year for covered interior plumbing repairs and caps reimbursement at $1,500 per covered item for most other problems.

But the worst feature of these warranties is that you don’t get to choose the companies that do the work. You call the warranty company and it dispatches a repair service with which it contracts. Since repair services work for the warranty companies — not you — they may be all too willing to find reasons the provider can use to deny your claim. Warranty companies boast that their repair services are prescreened and do good work, but there’s much evidence that they don’t thoroughly vet them. A large portion of the thousands of complaints files against home warranty providers relate to lousy service. Common gripes include claims being denied, repairs performed incorrectly, and repairs taking days or weeks to schedule or complete. Many people reported that just reaching a customer service representative sometimes required waiting on hold for an hour or more. Some warranty companies have been subject to government action. In 2015, Choice Home Warranty and its principal executives agreed to pay nearly $800,000 to settle a lawsuit brought by the New Jersey attorney general that accused them of “using creative and deceptive means to deny their customers’ claims.” But despite the settlement, the complaints continue. In the three years since Choice Home Warranty signed the agreement, the Better Business Bureau has received more than 4,700 complaints against the company.

Finally, if you decide to research home warranties on your own, beware of websites that purport to rate home warranty companies: it’s hard to know how independent or accurate they are. For instance, the site Top 10 Home Warranty Reviews lists Choice Home Warranty — a company with a very poor track record — as its top pick, with a rating of “outstanding 9.9.” The website’s advertising disclosure acknowledges that it accepts money from the companies it features and that those fees may influence its ratings.