Should you get a home warranty? How do you avoid paying too much for bad service? I’ll share some tips that you need to know!
Deciding on whether to pick up a home warranty is not an easy choice. There are many factors, but ultimately, it comes down to peace of mind. There are a few aspects of home warranties that you need to be familiar with before jumping into any kind of contract.
What Is A Home Warranty?
For those that aren’t already aware, home warranties are a form of insurance for breakdowns in your home appliances and systems. This means that you pay a premium, and when your cooker or boiler breaks down, you get on the phone to the home warranty company, tell them to fix it, and pay them a small service fee.
How To Avoid Home Warranty Troubles
What are some of the important things to be aware of when getting a home warranty?
#1 Be Aware of Cancellation Fees
Firstly, it’s important to know their cancellation fees — you don’t want to be ripped off if you try and leave the service, and it’s always good practice to have low sunk costs so it’s preferable to pay monthly instead of annually.
#2 Ask How Much The Premium Is
Secondly, you want to know how much the premium is — this is the monthly/annual price for the insurance coverage. This way you can compare different plans and pick the one that fits in your budget.
#3 Know What the Deductible Is
Thirdly, you want to know the deductible — this is the call out cost of a claim (this usually covers the first X amount of the repair/claim cost, also known as ‘excess’).
#4 Understand How Much the Coverage Limit Is
Lastly, you want to know how much the coverage limit is, to ensure you’re covering the worst-case scenario. There are sometimes limits with how much they will cover.
Limits are usually around the same amount in the home warranty industry, and anything between $1,000 and $2,000 is expected. Having a higher one becomes much more important when you own expensive systems however, such as swimming pools or state-of-the-art HVAC systems.
The premium is usually around $500 too. This does fluctuate a little, but it’s not necessarily the most important aspect of working out the financials behind home warranties. In fact, deductibles are arguably more important. This is because you want to ensure that you’re not having to pay out lots of money each time you claim, making you adverse to even claiming, or leaving yourself worse off than if you merely hadn’t bothered with the insurance altogether.
Using Home Warranties Vs Hiring Local Workers
Cinch home services operates in Virginia, and services like Cinch are the epitome of the argument against the notion that home warranties are leaving you better off financially. Yes, they offer peace of mind and security (though some companies even fail to do this). Yet, do you actually end up better off than if you were to just use local tradesmen?
Well, it’s a difficult question because it depends on a lot of factors, such as what systems are breaking down, how much local tradesmen cost and so on. However, with Cinch’s $100 to $150 deductible, it’s extremely difficult to justify that you will be better off using their service.
This number is not only higher than the market average deductible, it’s twice as much. $150, just to call out the service you’re already paying for, is extremely harsh. Of course, the breakdown may have cost more than this, but you have to factor in the $420+ annual premium of Cinch Home Warranty.
If your refrigerator breaks down, and you’re reliant on Cinch to fix it, it’s likely that you’ll be paying the same if not more than a local freelance worker to fix it. The idea that this deductible still exists for even the most minor of breakdowns is infuriating, yet, Cinch is a nationwide business with a huge customer base. In fact, Cinch reports to cover over 1,000,000 homes.
People perhaps still opt for Cinch because of their low cancellation fee. It does feel reassuring knowing that you can cancel insurance for very little cost ($25 at Cinch). This really is an advantage for those who swap around their home warranty providers frequently (i.e. to get a feel for many different ones and find the best).
Cinch being a trustworthy company with a good reputation is also a cause for their large customer base. Whilst the terms and conditions appear to be slightly tricky, once you’re on board with them, Cinch have a reputation for being fair game. They’ve also attracted less bad press and lawsuits than competitors such as Choice.
So, even though the deal you’re receiving is poor, many have gone for it because it appears to be in good faith. In that sense, it’s better to have certainty of the service costing a lot, as opposed to it unexpectedly doing so. However, it’s clearly a very poor offer, with many competitors offering much more reasonable deductibles.
Ultimately, if you have frequent small breakdowns, you may find yourself not even calling up Cinch and instead opting for a local tradesman because it might even be cheaper. This is the exact scenario that you want to avoid.