Why Home Warranties Are A Terrible Idea

If you’re considering buying a home warranty, a service contract that covers all of your home appliances and many other routine home repairs, you may be better off taking the money that you would have spent and sticking it in a savings account instead. The New Jersey Division of Consumer Affairs says that one home warranty company in that state collected fees, but wasn’t keen to pay for any actual repairs.

Home warranties seem like a good idea on the surface: instead of dealing with the unpredictable costs of home and appliance repair when they crop up, you simply pay a set amount for your contract, then sit back and wait for the repair technicians to ring your doorbell. However, New Jersey alleges that one company, Choice Home Warranty, collected payments for the contracts it sold, but was less keen on the idea of paying customers’ repair bills.

According to the state’s complaint, CHW had an approach of threefold terribleness:

1. Require meticulous maintenance on every appliance. In one case, they asked for twelve years’ worth of records. If the company decided that a customer hadn’t properly maintained an item, they wouldn’t pay. Hint: customers’ maintenance was rarely up to the company’s exacting standards.

2. Offer cash instead of repairs or replacements. Your dryer will cost $600 to repair? How about a $180 cash payment instead? Customers were not pleased with these offers.

3. Don’t pay the bills. When they finally did dispatch someone to repair a customer’s appliance or house, the company allegedly just sat on the bills. The state knows of outstanding invoices to different repair companies totaling $21,690.92.

Why you should avoid home warranties [Consumer Reports]