2 Years Into Home Warranties: What We've Learned
An Industry Fraught With Controversy
The OK, the BAD, and the UGLY
Out of all the industries we cover, we far and away receive the most feedback regarding home warranties... and this feedback is rarely tepid.
There is not much middle ground. Reviews are either horrible or entirely too positive, creating a conflicted picture with reviews weighted heavily at opposite ends (1 star or 5 stars) that is confusing to the potential new home warranty customer.
Why so many negative reviews? Why so many bad experiences? In this article we will try and summarize what we have learned from our experiences in this industry over the last two years. And hopefully provide some guidance moving forward.
What Is a Home Warranty?
A home warranty is essentially a service contract where you pay a monthly or yearly premium to protect the appliances and systems in your house that are not typically covered by homeowners insurance, i.e. air conditioner, washer & dryer, oven, etc.
This is how it works on paper: Your dryer breaks down, you call up the home warranty provider, they send out a technician, you pay the service fee (usually $50-$80), technician fixes the problem, home warranty pays technician, problem solved, clothes are once again dry. For a more detailed description see here.
Sometimes if they can't find a technician they'll tell you to choose one, pay out of pocket, and submit the claim for reimbursement. This situation presents a whole other set of problems which we also will address.
On our site we feature a top ten list of the best home warranty providers in the country. As previously mentioned, most of these companies, even our number one choice, seem to possess a disproportionate number of very bad reviews. This is not only on our site, but you will notice the same trend across most other review sites as well.
Let's look at the main gripes.
Gripe #1: My [Item] Was Not Covered
Home warranty sales departments are separate from claims departments. They are often staffed by people receiving commission and who, as a result, can be somewhat aggressive. What they want to do is get you to pay for a multi-year plan up front, let's say $650 for 2 years of coverage. Generally speaking, once you've paid this person is basically done with you.
After your contract start date, most companies employ a waiting period of 30 days where you cannot make a claim.
When the waiting period is finished you are free to file a claim. Let's say after 6 months the aforementioned dryer breaks down and you call the home warranty company. If everything goes well they have technicians they partner with in your area and send one out in a timely fashion.
The technician arrives, diagnosis the problem, and communicates with your home warranty provider. The company then says they will not cover the repair because the damage to your dryer is due to “warping.” Here we hit the first, and biggest, snag: contract restrictions.
In my research, I read every contract from every home warranty company on our website. I made note of the coverage restrictions that each company had and made this a ranking factor for how we rank home warranties on our site. I also surveyed the number of items covered, per item or yearly caps, and service fee compared to yearly deductible to determine the ranking factor Plan Value.
Gripe #2: The Contracts Are So Complicated!
Every home warranty provider we feature has their terms and restrictions online. We suggest you find the contract, print it out, and go through it with a fine tooth comb. You must take a survey of all the appliances and systems in your house and measure them up against what the company says it will and will not cover. Ask yourself, is this particular company the right fit for the appliances and systems I have in my house?
These contracts can be extremely complicated. Although it is tempting to speculate that companies write them like this to weasel out of making repairs, you have to realize many of these companies have been around for quite some time and could not continue operating year after year if they were denying claims the majority of the time.
In our talks with industry insiders we've come to realize there are reasons home warranty contracts have become so picky and specific. In the same way people will take out a dental insurance policy only after they realize they need costly surgery, some home warranty customers will purchase a service contract when only they realize their appliances and/or systems are in need of expensive repairs. They then get the home warranty provider to foot the bill for the repairs only to cancel their contract afterward for a prorated refund.
Home warranty providers write their contracts to best anticipate pre-existing conditions and basically cover THEMSELVES from scams. Unfortunately, the honest customer sometimes gets lost in the mix. This is the nature of the business.
Taking all this into consideration, I included the restrictiveness of a given company's contract as a ranking factor. We are looking for contracts with clear restrictions that are easy to understand and not subject to interpretation. We are also looking for reasonable stipulations and not excessive and confusing lists. We like companies who will cover pre existing conditions and those who do not require you to produce maintenance records documenting the upkeep of a system or appliance.
Gripe #3: A Problem With The Technician
Most of the home warranty providers we feature operate more or less nationwide. This doesn't mean their networks of contractors are uniformly strong though. The technician pool in suburban Baltimore might be a tad more robust than the middle of nowhere Wyoming. You can be sure this will not be addressed during the sales pitch, though.
This is also the topic of many complaints. Either the provider can't find a local technician, or in some cases the local guys don't want to do business with the warranty provider because they've been burned on payments in the past. Either way when you get into this situation, your issue can remain unaddressed for weeks while they try and find someone to fix it.
If they can't find anyone, the warranty provider will ask you to use your own repairman and bill them after. This could be another nightmare as the type repair wasn't cleared beforehand and could be subject to (you guessed it) contract restrictions. And even if the repair is approved you can be sure there are no shortage of stories of customers waiting forever for the reimbursement check, if they get it at all.
In any case we recommend talking to local contractors before you chose a home warranty company. Find out what home warranty companies they use, and like to do business with. Find out from the source approximately home many local technicians are available. This no doubt sounds time consuming, but it can save you time and money down the road. What the company tells you during the sales pitch can be a whole different story on the street.
I included Contractor Network as a ranking factor to cover this area, but admittedly this is only a big picture snapshot. We still recommend you do the best you can to identify coverage in your area.
Gripe #4: Customer Service Is Uncommunicative
Sometimes the home warranty provider seems to be flat out ignoring you. This could be because they legitimately can't find a way to solve your problem, are understaffed in claims, or just generally aren't trained or supervised properly. If the provider doesn't send anyone out, won't answer calls, or tells you to use your own technician and bill them only to never respond, it's possible you've fallen for a home warranty scam.
In the past two years we've come across this unfortunate scenario. A home warranty company is set up with an address that does not contain an office. Offsite salespeople aggressively talk customers into multi-year contracts and take the money up front. Claims calls are seldom or never answered because there is not really a claims department. If calls are answered the customer is told to use their own contractor only to never be paid.
These companies grab all the money they can then disappear when the complaint level draws the attention of the local news or BBB. They then set up somewhere else. To protect yourself against this it is first crucial to examine the companies BBB profile, and also determine how many years they've been in business.
The ranking factor Customer Experience takes into consideration a given company's reputation pooling customer reviews from a wide range of organizations and online review websites.
Though helpful, online reviews can also be problematic as companies with many bad reviews will often start writing their own positive reviews to offset the negative. Online review sites such as ours are engaged in a constant battle to discern fake positive reviews from real ones. This leads us to our final section.
Our Take: Deciphering Home Warranty Reviews
First of all, in our experience home warranty customers are far less likely to leave positive reviews if they are satisfied than they are to leave negative if they are not. This is just human nature and true across many other consumer sectors as well. When things work as advertised, happy customers are typically satisfied and quiet.
- If the home warranty company you are dealing with has been in operation for less that a year and offering you a really low price...buyer beware, especially if this brand new company only has glowing reviews. We are not saying they are not legit, we are saying it might be a good idea to let the company establish itself and gauge the legitimate reviews once they start rolling in. If you want to know how long a company has been in operation, check the BBB's website.
- Paradoxically, considering the trends in home warranty reviews we've cited above, too many good reviews is also a bad sign. In this industry we expect the negative reviews to outweigh the positive. A more or less even mix of good and bad reviews is preferable.
- Perhaps the companies most worth taking a look at are the ones who have been in business for more than a year who have the fewest reviews of all. Since warranty companies probably solicit their own positive reviews to outweigh the bad ones, very few reviews is a good sign as the company is not addressing mountains of negative customer feedback.
** Our number 1 company, American Home Shield, deserves special consideration here. AHS is far and away the industry leader, operating in all 50 states and accounting for a whopping 41% market share of the home warranty landscape. Wherever you look online, AHS has the most negative reviews in terms of sheer numbers. We believe, however, that this is mainly representative of the company having the largest customer base in the nation. For nearly half a century, AHS has been growing and reliably providing home warranty services to its customers. They also have one of the least restrictive contracts in terms of components they cover within each appliance and system.
To Warranty or not to Warranty
So there it is, an industry that is certainly not immune to conflict and scandal. Many financial and consumer publications advise you to steer clear of home warranties altogether, recommending you put the equivalent of a monthly premium into a discretionary savings account specifically for home repairs.
We however think a home warranty can be a useful fit into your monthly budget, particularly if your appliances and systems are reaching the 10-year mark. But you have to do your homework, make sure the contract fits your needs, find out about the contractors in your area, and above all don't let yourself be pressured by aggressive salespeople. Follow our tips about researching the company and interpreting online reviews and you'll be in good shape!