Buying a house in the USA? Don’t forget your home warranty

If you’re moving in the U.S from the UK, Australia, Italy, France or almost anywhere else in the world you have probably never heard about a home warranty. There are more than 1m foreigner who get legal permanent residency in the U.S in addition to probably hundreds of thousands more who slip through the tangling cracks of immigration (there are more than 10m illegal immigrants in the USA – read a fascinating NY Times piece on it here).

I can only imagine the vast majority of these immigrants, legal or not, have never heard of a home warranty service. In fact, I guesstimate most Americans, those who were born on U.S soil, and those who weren’t, never heard the term “home warranty” or contemplated whether to use it or not.

When something gets broken in their house, whether it is an electric appliance, the sewerage system, the pool, the air-conditioning system, or something else – they either fix it themselves, or pay a professional to do it. While this can be the best solution for some people, it might be ill-advised for others.

Repairs in the USA

If you put down a hefty $50,000 for a pool, you might want to avoid spending $550-$800 on a new motor which “breaks down fastest“. If you would find yourself in a position where you need a new air compressor it will cost you no less than $1,000 just for parts, even if you know how to DYI, and not many people do (so they would pay around $1,800 including labour). Similarly,  if your refrigeration will get broken beyond repair and you would need to buy a new one it may cost you anywhere between $200 for the cheapest brand and up to $30,000 if you want to treat yourself to a high-end-built-it piece of art.

My bottom line is that you would that repairs in the USA, much like anywhere else on the globe, could be very expensive. If must, or want, to stay frugal, and avoid large unexpected expenses, you may consider yourself a home warranty policy.

What is home warranty? Is it a scam?

A home warranty policy is a type of “insurance” in lack of better word. You pay a monthly fee (or premium), and in an event something breaks in your house you are entitled to a free repair service. Each company has several home warranty plans that cover different items and guarantee a different level of service. Home warranty companies have been receiving some bad press over the past few years as there are many disgruntled customers. The thing about home warranty companies, is that very much like insurance companies, are notorious for being very inflexible and stick on the to T&C agreement. Meaning, it is rare that such a company would go above and beyond covering what can be found on the policy. In addition to that, there are scam companies, but that goes for any other industry in the world – there are always rotten apples.

Before signing up with any company, I would strongly recommend doing some research as follows:

1. Finding out companies that can serve you (each company covers between 5 and 30 states, I have yet to come across one home warranty company that operates nation-wide)
2. Discovering which of these companies are reputable
3. Looking into different plans and carefully reading T&C
4. Setting realistic expectations. This solution is supposed to save you money, not get you the best service in the world in an ultra prompt manner.