If you own a home, you have probably received information on various home warranty programs that promise to cover home repairs. These may have come from insurance companies and banks, but they also come from companies that specialize in this type of coverage. One of the best known home warranty companies is American Home Shield.
How do these programs work? Well, basically you enroll, pay a monthly fee depending on the warranty coverage you want, and then pay a flat fee when you need something fixed. On the surface, these programs sound great. You get piece of mind concerning the major expense involved in repairing most of the more costly items or repairs in your house, e.g. air conditioners, washer/dryer, oven, etc., and even general coverages like plumbing and electrical.
Sound good? Remember the old adage: If it sounds too good to be true, it probably is! These companies are in business to make a profit, and they can't make money if they pay out too much. Sure, they promised to cover that heat pump that died, but then you find out that it won't be covered because you didn't keep it properly maintained or it was "installed incorrectly".
This is not to suggest that these programs never pay out, or that you won't be the exception and have a very expensive repair bill covered by the warranty. It's just important to be informed and be aware of what you are purchasing. After all, this is basically an extended warranty and most experts will tell you that they just aren't worth the extra money. Still, you may be interested in these types of programs, so make sure to research the company and its program very carefully.
For an excellent example of how the American Home Shield program works, and to read some of the complaints against its practices, check out the following links: