Why do you have a home warranty?
DISCLAIMER: Blue Ridge Heating and Air is not contractually affiliated with any Home Warranty provider, and has no opinions, complaints, or endorsements of any particular warranty provider.
If you are like most people, it's because you have one or more HVAC system replacements looming, and you want some cost protection/assistance with that from a home warranty. You may also be seeking some "peace-of-mind" that a large, unexpected HVAC expense will not blind-side you. If you're like most homeowners, we don't save up for heat pumps and furnaces. I have some thoughts on this strategy.
My home warranty experience as a homeowner.
When I bought the house I currently live in, it came with a seller-funded home warranty with a well-known national Home Warranty company. The two HVAC systems in this house were original equipment from the construction of the house, roughly 15 years old. This was long before I was working in the HVAC industry. Knowing that these systems were likely near or beyond the end of their useful lives, I renewed the warranty for each of the next five years. Then in the sixth year, the warranty company tripled my renewal price. I did not renew. My conclusion is that the home warranty company decided that my HVAC systems were too much of a liability so they "fired me" as a customer.
My observations from the HVAC industry.
Now what I am in the heating and air business, I see a lot of discussion on social media about home warranties. I have also interacted with a number of customers who are struggling to get their HVAC system whole with their home warranty provider. This assessment certainly doesn't apply to every warranty company, and I have seen more than one customer testimonial of a positive experience with their home warranty. However, the prevailing theme is that they pay a monthly fee for the warranty, pay a "deductible" for a service call when their system needs repair, and a band-aid repair is applied by the warranty company. In many cases, a technician may even tell the homeowner that the system should be replaced, but the warranty company is only going to cover the repair option.
In 2018, the Office of the Attorney General for the District of Columbia issued a Consumer Alert regarding home warranties. Linked is a fact sheet published by their office.
Let's look at the cash flow, home comfort, energy usage, and peace-of-mind
Home Warranty Cost: Average Cost of the Home Warranty: ~$50-$70 per month - assume $60
Average Cost of a HVAC annual maintenance plan: ~$13-$40 per month (Blue Ridge Heating and Air price is $16.58 per month for 2 maintenances per year) - assume $20
Energy Cost: If you are operating an older 10 SEER system, you could realize 25-40% energy savings depending on the efficiency of the replacement system you could install. Let's assume 25% savings are possible So if you're paying $150 per month for energy (electricity/gas) to heat and cool your home, you could save $37 per month in energy cost.
Deductible for service: most plans will require a deductible, commonly $75 per claim.
Caps: if you are approved for a system replacement, the replacement benefit typically has a cap on the dollar amount covered.
Monthly spend: $60 (warranty) + $20 (HVAC maintenance plan) + $37 (potential energy savings) = $117 per month
So, you may be spending about $117 per month to:
hopefully protect yourself and family from a large financial liability
hopefully keep your home comfortable with your old, "always seems to be running" heat pump, air conditioner, or furnace
hopefully give you peace-of-mind