Home Insurance and Warranty

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Last Updated: Wednesday, 22 March 2023 20:45
Published: Wednesday, 22 March 2023 18:36
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Home Insurance Plans:

If you ever owned a home or bought a home, you would have heard about home insurance. Home Insurance is an Insurance Plan provided by Insurance companies to compensate in case something bad happens to your home. Typical events include hail damage, fire, hurricane, etc. Your home will be repaired or rebuilt after you pay your deductible. People usually choose a 1% deductible, though the premium is higher for lower deductible compared to higher deductible. These Insurance companies are regulated by the State Government, so they can't deny a valid claim. Or else you can file file a complaint with the appropriate state government department. So, the risk of getting scammed with these Insurance companies is almost negligible.

For ex, in state of Texas, The Texas Department of Insurance (TDI) regulates these Insurance companies. You may file a complaint against an insurer. You can also find information on the TDI website at www.tdi.texas.gov.

Insurance Premiums are usually lower for a new home as new homes are going to have less issues. For a home that is older than 10 years, premiums go up significantly. For a typical new home of $500K, and a deductible of 1%, you may get Insurance plans in range of $1K. For older homes, you may have to pay more or up ypur deductible to 2% to get closer to $1K. Note that these rates are only for Home owners. If you don't live in your home all the time (i.e due to being a vacation home) or if you have rented it out, home insurance plans can easily cost double of what a home owner might pay for the same home. A typical home that you rent out may cost close to $5K as of 2023.

If you ever make an Insurance claim, your premiums will go up. So, be careful of when you make a claim. If the cost of repairing or fixing something is close to what your deductible, don't even bother calling the Insurance Company.

My advice would be get an Insurance plan with the highest deductible (2% or more) and lowest premium. Home Insurance is supposed to help you in case of a catastrophe and not to pay for little damages here or there. I never pay more than $1K/year for any Insurance

I've my home Insurance thru AAA 9American Automobile Association), the same company that provides Towing services. They provide both Home Owner's Insurance as well as Auto Insurance. Being a non profit, their rates are usually the lowest that you can find anywhere. Their customer service and claim processing is also very superior. I've been with them for 20 years with multiple claims filed, never had any issues.

Home Warranty Plans:

Apart from Home Insurance plans, there are also home warranty plans. These plans cover for items inside your house that may need to be fixed or repaired. Home Insurance plans only cover your home, and your personal property if it gets damaged as part of damage to your house. Home Warranty plans cover malfunction and repairs to your appliances inside the house as refrigerator, washer/dryer, microwave, oven, Sewer, swimming pool, etc. These home warranty plans are advertised very heavily everywhere, because they are pure profit for the warranty companies. These Warranty companies are not regulated by state department, nor do they need any license. Even I or you may be able to open a waranty company. If your claim is not honored with a warranty company, the only recourse is to file a lawsuit in a court. These lawsuits are expensive, and warranty companies know that 99% of the people don't file lawsuits, so they take advantage of that.

Scam: I've listed these warranty companies along with other scams under the scam section. These home warranty plans are nothing short of scam. They will pay petty bills here and there, and deny all claims > $200. Or they will offer you flat $200 for replacement of a big ticket item like an AC which may cost $5K to fix. You will pay premium in the order of $1K/year on top of trip fee of $75-$125. Trip fee is a fee that is sort of deductible that you have to pay every time you file a claim, and someone comes to your house to fix it.

I've dealt with at least 3 separate warranty companies. 2 opf them paid for < $200 in claim, and one never paid for any claim filed. They have agents who will say "we'll respond in 24-48 hrs", but will never call back. They purposely talk in difficult to understand accent, and repeat exactly the same scripted sentence in all calls related to a claim. Sometimes they will ask you to pay for arepair, saying that you file for reimbursement later. That re imbursement will never come, because no one will ever respond.

Here's the kicker: If you call your credit card company to dispute the charge for the premium, they will not be able to help you. Most credit card companies only allow you to dispute charges less than 60 days old. These warranty companies don't allow you to file claim for first 30 days. Even if you file after 30 days, they will wil delay the final resolution to over 30 days, so that you are out of protection by your credit card company. Even if you are able to dispute, someone from warranty company will call and ask you to remove the dispute, and offer you a resolution. Never fall for any of these warranty companies. Just avoid them at all cost. Most of the items under repair can be bought new for that price.

There are quite a few warranty companies that I've dealt with, and it's a nightmare. You will never see your money, and you will never get any service. Many of these warranty companies have very good positive reviews on some review websites. These are all "paid" reviews, and search engines show these reviews at top, as I guess they are paid by these Warranty companies to have those reviews on top. You have to go thru multiple pages of search, until you get to real reviews. All these 8/10 or 9/10 rating on many home warranty review websites are plain lie. These sites exist because they get a hefty commission for any clicks (i.e https://www.homewarrantyreviews.com). Best place to get honest review is BBB (Better Business Bureau). Trustpilot review website (trustpilot.com) can't be trusted.

Here are the real reviews for few of them:

1. Select Home warranty: The worst of the lot. Their premiums are lower than others, and the agent at sign up will claim everything is covered. They will try to get you hooked for longer duration plan. Never paid a single dollar for any claim. They will keep on going on and on for 30 days or so, and then one day suddenly deny your claim. Their denial reason is the same for most of the people.

2. American Home Shield (AHS): Most popular and biggest Home insurance company out there. Equally bad, though they do pay petty claims.

3. First American Home Warranty: Another big name with same motto "rip you off".

 

Conclusion:

Home Insurance plans are mandatory if you have a mortgage on your home. They are worth the money as they are regulated by State Government, so genuine claims can't be denied. They serve in case of a catastrophe.

Home Warranty plans are a scam. They are not regulated by state governments, and lawsuit in a court is the only way to recover your money. Instead put that money into "stock market index fund ETF" every yerar, and within a few years, you will have enough to pay for most of the repairs from your saved money.