Insurance and Finance

The Home Warranty Debate

By Jennifer Chappell Smith 10.21.15

A home warranty on an existing home can sound like a good deal. It’s essentially a piece of paper among the many new home buyers sign and file away on their “closing day.” But this one is different, because it offers buyers the promise that appliances and systems may be covered if they break down after the mortgage company hands you the house key.

Twelve-month home warranties are often included with the purchase of a home, but then buyers must decide whether to renew it and continue paying for what’s essentially a service contract.

If you’re ever faced with this decision, here’s help deciding whether to keep a warranty active year after year.

Q: What is a home warranty, exactly?

A: It’s a service contract. Kind of like the warranty offered at an electronics store when you buy a new flat-screen TV or laptop. It’s a promise that certain systems or appliances in the home will be replaced for free or with costs defrayed if they break.

Q: Why do home warranties get a bad rap?

A: Issues with home warranty companies top complaints on Angie’s List. And consumer advocate Clark Howard says on his blog,, that home warranties aren’t worth the paper they’re written on for a few reasons: The warranty companies are difficult to deal with, they get to pick the contractor you use, and you have to pay a deductible. He says it’s smarter to put aside money each month in a home repair fund than to pay $400 to $600 for a home warranty that may not help you if something breaks.

Q: Who monitors home warranties?

A: In Texas, the Texas Real Estate Commission keeps a watchful eye on home warranty companies. See the current list of residential service companies that have licenses to do business in Texas, and steer clear of those that don’t.

Q: What’s the trick to understanding what’s covered?

A: Understand what “known condition” means, advises Inman, a real estate news outlet. Warranties simply won’t cover a problem that qualifies as “known,” which means something that could have been detected by a home inspection.

Q: How can you make the best use of a home warranty?

A: The Better Business Bureau (BBB) offers these tips:

—Know what the home warranty does and does not cover.

—Find out what steps need to be taken in order to file a claim under the home warranty.

—Ensure that the warranty documents describe the necessary steps needed to resolve any dispute that may arise between the homeowner and the warranty company.

—Read the warranty documents carefully and make note of the premium price, the warranty coverage period, and any gaps in coverage.

—Research the business thoroughly.

A solid maintenance routine can prolong the life of your home. Here’s a guide to help you know what needs doing around the house this fall.