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The trouble with home warranty plans

Home warranty plans have been picking up in popularity, mostly thanks to aggressive advertising campaigns that appeal to the homeowner's worry that something expensive will suddenly break and need a repair.

In the ads, the home warranties seem like the perfect insurance policy for the savvy homeowner who wants to avoid serious financial strains when an appliance or heater malfunctions or quits. Unfortunately, most consumers miss the fine print included with those warranties -- and they may not get what they think they are buying.

Home warranties usually can avoid paying for a lot of repairs. In many cases, the home warranty company can deny coverage any time it determines that an appliance or other "covered" item wasn't being properly maintained. Since the decision about what constitutes proper maintenance is solely up to the company, the company always has the advantage.

In addition, companies can refuse to replace a unit that obviously has seen better days -- opting to replace a part or two instead. That can leave homeowners frustrated and living with appliances that don't always function the way that they should.

Before you agree to a home warranty plan that covers your electronics, ask a few questions:

1. Is additional coverage necessary?

If you just bought a home and everything is new, the policy probably isn't necessary. You may have individual warranties that already do as much as the plan you're considering.

2. What kind of additional expenses do you have to cover?

Aside from the cost of the plan, do you have to make co-payments on repairs? What about diagnostic procedures? How much are the co-payments?

3. What sort of appeal rights do you have?

If the company wants to repair something and you want to replace it, what are the criteria for the decision? Can you appeal the decision?

4. Do you really understand what the warranty covers?

You may find that some of your appliances aren't covered because they already had issues (or "pre-existing conditions"). Others may not be covered fully. For example, the motor to your washing machine might be covered but not the barrel inside.

Do your research before you sign up for a home warranty. For some homeowners, they have value. Others may be better off putting their money aside for an emergency instead. If you need help reviewing the terms of home warranty contract or are disputing a contract you are already in, an attorney can help you understand your rights.

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