Major home appliances and systems are invariably costly to fix, and a home warranty theoretically provides peace of mind by covering essential repairs for conditions that aren’t pre-existing. In many cases, however, people attempting to use their warranty experience only frustration, and getting out of the plan can be surprisingly difficult.
Should I Cancel My Home Warranty?
Homeowners should cancel their home warranty if they feel like they’re not getting enough value for the amount of money they’re putting into it. A typical home warranty plan costs between $350-$600 a year, plus an additional $50-$75 service fee each time you need a repair, which can only be done by warranty-approved repairmen.
However, if your appliances are new, they typically come with their own built-in warranties, and most states require builders to warranty the home’s structural elements for up to ten years. If either of these situations applies to you, a home warranty may not be the best choice. It may make more financial sense to simply put money into a home maintenance fund.
A good way to evaluate your home appliance and system needs is to compare the age of each covered item with its average lifespan (the National Association of Certified Home Inspectors has a handy series of charts just for this purpose). If your home is more than ten years old, or has expensive components near or past their life expectancy (but without pre-existing issues), then a home warranty can be a great help in covering repair costs.
Often, homebuyers receive a home warranty bundled up in their purchase, as many sellers believe it adds a certain competitive edge. Buyers view them as an insurance policy in case of unforeseen disaster, and generally assume that everything is covered with the plan, but it’s important to bear in mind that they typically only include appliances and systems that are running correctly by the closing date. This means that recurring issues, such as that ongoing leak in the nursery, aren’t covered, and other systems (pools and sprinklers, to name just two), probably aren’t under warranty either. In fact, in most states, a home warranty is not the same as insurance, even though it may be backed by an insurance policy.
How Do I Cancel My Home Warranty?
Once you’ve evaluated all the different systems and appliances in your home, (or you’ve reached the breaking point with your current home warranty provider), take the time to thoroughly read your contract, especially as pertains to their cancellation policy. If you can’t find the original contract, send a letter via certified post mail (including your policy number and coverage dates, if possible), requesting a copy of the contract for personal records.
If your policy is less than 30 days old and you haven’t yet received any service, most companies will provide a full refund, minus a service fee. Having said that, for most homeowners, the process is a bit more complicated, and there are several steps you must take in order to cancel your contract.
- Contact the home warranty company and talk to a representative, making sure to get their name. This is much more of a hassle than just writing an email, but it will also get more immediate results, and the certainty of having spoken to a real, accountable person. Inquire about the standard termination process, whether you can expect any prorated premium refund, and what the cancellation fees are, if any. The representative may inform you that you need to send in a written notice of termination. If that’s the case, get the email or mailing address.
- Write the notice of termination, including the current date, your policy number, and dates of coverage. If you received information about a prorated premium refund from the representative, specify the amount and add the rep’s name. Make sure to sign your name at the bottom.
- Send the notice via registered post or courier to the address you received. Make sure to keep the receipt, and a copy of the letter. Confirm that the letter has been delivered.
- If payments are subtracted automatically from your account or card, call the credit card issuer or bank and inform the customer server representative that the account is listed to be terminated, and notify them of the last expected payment date. Make sure to jot down the date and time of the phone call along with the name of the person you spoke with.
- Contact the warranty company via registered mail and request a written verification of warranty cancellation. This can take up to five weeks. When it arrives, file it away with the original contract.
- Wait for a check from the home warranty company with the prorated premium refund, which may have a cancellation fee removed from it.
What Should I Watch out For?
Every company has different cancellation policies. For instance, American Home Shield needs a minimum of 30 days' notice, so you'll have to pay an additional month after you ask for your policy to be terminated.
Another issue we've noted with unhappy customers has to do with automated payments. Once you've made a termination request or the request has been confirmed, it's of utmost importance to track your bank statements, as some companies will continue to charge automated payments. If money is deducted from an account 30 days after the cancellation request is made or confirmed, call your bank or card issuer, with proof of the cancellation. In most cases, the bank or card issuer will repay the incorrect additional charge.
Lastly, if the reason you're cancelling your policy is mainly due to selling the property, it may be possible to keep the policy in force for the buyer of your home, without having to terminate it. The policy can even be an additional motivation for the buyer, as they can generally be transferred easily.