Should you choose to purchase home warranty insurance be sure to read the contract before you sign on the dotted line. Like all insurances the fine print matters. Typically, they place limits on coverage so that while you think you are covered, you may find that when it comes time for them to pay, it can turn into a real hassle. Some of the companies operate from overseas call centers. You can spend hours on the phone attempting to resolve a claim. And, plan on dealing with call center hell.
One of the problems with these companies is replacement of an appliance in the event it can't be fixed. If you own high end appliances, odds are pretty good they will not be compared with high end appliances to determine a replacement value. In fact, you may be offered half what the actual cost to replace is since they will compare what you have with much cheaper appliances that are available at Home Depot or Lowes. This is a particular problem for people that own custom homes and or people that have just chosen high end appliances for their homes. It can be a very frustrating experience.
These could be the reasons that Dave Ramsey, a leading advisor on financial issues advises against buying home warranty insurance. Instead, he recommends self insuring, in essence putting money aside to deal with home repairs that are inevitable. If your appliances, air conditioner etc. are more than 10 years old, the odds are pretty good that repairs will be needed. So plan for it. Make sure you have your emergency repair money sitting somewhere to cover repairs that will be needed.
