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Published April 11, 2014, 02:41 PM

Reducing risks: Home warranties help, but know what you’re buying, experts advise

Grand Forks -- When Mark Veitenheimer purchased his home here in 2012, he considered the home warranty provided by the seller as little more than a few pages in a mountain of closing paperwork.

By: Angie Wieck, INFORUM

Grand Forks -- When Mark Veitenheimer purchased his home here in 2012, he considered the home warranty provided by the seller as little more than a few pages in a mountain of closing paperwork.

He didn’t expect to actually ever use the policy, though he was a little concerned that the furnace was as old as the 1964 home.

Then, a snowstorm hit, and the furnace died. Finding those papers became a top priority.

He immediately contacted his provider, The Warranty Group, which cut him a check for $2,000. They considered that amount to be the average market value for a new furnace.

While furnaces here tend to cost more than that, Veitenheimer did not complain.

“When it was all said and done, it was more like $3,000, but $900 for a brand new furnace is not a bad deal,” he said.

Not everyone has had as good of an experience with their warranty company as Veitenheimer.

According to Angie’s List, a website that compiles reviews of service companies, nearly 40 percent of the reviews submitted in 2013 for home warranty companies were given D or F grades.

Among the complaints were misunderstandings about what was covered, no control over who does the repairs, no control over replacement models, and reimbursement issues.

What is a home warranty?

A home warranty is essentially an insurance policy that covers items in the home such as the furnace, air conditioner, water heater, trash compactor, refrigerator, range, washer and dryer during the first year of home ownership.

Jane Freidinger, chief marketing manager with Home Warranty Inc., said it’s most common for home warranties to be purchased by the seller as a way to make their property stand out to potential buyers.She said buyers sometimes request the warranty because they tend to be cash poor at closing after the down payment and closing costs. A home warranty may protect them from any large repair costs during the first year of home ownership.

A basic plan with Home Warranty is $450 per year, or $37.50 per month.

Marie Mueller of Advantage Realtors in Fargo says a home warranty may prove beneficial with the purchase of any property over 10 to 12 years old because that is the average life span of a lot of appliances today.

A $450 policy more than pays for itself if a large appliance such as a refrigerator needs to be replaced, she said.

Freidinger said 50 percent of claim dollars actually go toward heating, ventilation and air conditioning repairs. She said these items are often not thoroughly examined during the home inspection.

“It takes a licensed HVAC technician to properly evaluate these systems, and home inspectors generally only look at the outside of the unit to see whether or not the unit is running,” she said.

Do your homework

Given the complaints about home warranty companies, it is important for homeowners to do their homework before purchasing a policy.

The Better Business Bureau offers the following tips:

  • Verify the warranty company’s track record with the BBB. See if there have been complaints made and if they were ultimately resolved.

  • Comparison shop. Not all companies offer the same benefits. Some lower-priced policies charge extra for coverage of water wells and some appliances, such as washing machines and dryers.

  • Consider the deductible. The industry average is $50 to $100 per claim, but some companies charge as much as $150 per call.

  • Ask the company who will perform the repairs. Most warranty companies have their own network of service contractors, but some allow homeowners to hire the contractor of their choice.

  • Get a detailed, impartial inspection of the house. The inspection will alert the buyer to any pre-existing problems, which may not be covered by the warranty.

  • Read the contract thoroughly. Make sure to fully understand what is or isn’t covered.

    Readers can reach Forum reporter

    Angie Wieck at (701) 241-5501