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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: thedayisbrave on January 28, 2015, 09:29:01 PM

Title: Home warranty v. "self insure"
Post by: thedayisbrave on January 28, 2015, 09:29:01 PM
I'm wondering if this is a personal decision or if there is one that far outweighs the other as far as cost savings go.  I've got a condo that I have a home warranty on, and about to close on a 2nd.  I'm not handy when it comes to appliances but I feel like it's more for peace of mind than anything. 

I've had one instance where a home warranty covered a new HVAC system that would've cost ~$2K.  Another time (more recently), it was not covered... but not total replacement the second time, just replacement of the fan. 

A home warranty costs me about $500/year.  I have it cover all major appliances.  Service charge $125 for someone to come out and diagnose.

I think I felt like it was worth it back in 2012 when paying $500 ended up saving me from shelling out $2K.  But now that I've become more Mustachian, I'm not so sure.  I have adequate rental reserves.  So I should I drop the warranty when it's expired and take my chances?
Title: Re: Home warranty v. "self insure"
Post by: Dimitri on January 28, 2015, 09:42:25 PM
Insurance - an ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table.
Ambrose Bierce in:The Unabridged Devil's Dictionary, University of Georgia Press, 1 December 2001, p. 133.

You know when you go to Vegas who the odds favor.  It is the same with insurance.  The game is designed to favor the house.  If you can afford the risk (and it sounds like you certainly can) why would you want to make a donation to your friendly home warranty company?
Title: Re: Home warranty v. "self insure"
Post by: arebelspy on January 29, 2015, 04:41:16 PM
Self insure.  The 300-500 you save/yr. you can put away and pay for the occasional appliance repair or replacement.
Title: Re: Home warranty v. "self insure"
Post by: GizmoTX on January 29, 2015, 04:49:33 PM
The only times we've used a home warranty was when we were buying or selling a house -- in both cases, seller provided.
Title: Re: Home warranty v. "self insure"
Post by: kanemath on January 29, 2015, 09:59:55 PM
I strongly recommend that you don't drop home warranty. No one knows when an appliance will breakdown and how expensive its repairs are going to be. Especially if your home and the appliances in it are 4+ years old. But before you purchase a warranty, do some research on the reviews, ratings and consumer opinion on home warranty companies. Also and find out about best warranty providers and their plans. There are quite a lot of affordable and comprehensive plans in today's market and also there are 0 deductible home warranty plans available and you can go with them to save money.
Title: Re: Home warranty v. "self insure"
Post by: Fishingmn on January 30, 2015, 07:51:27 AM
Most HOW's are about 50% toward the actual risk pool and 50% to cover admin, sales and profit.

Personally, I'd rather self insure but I'm in a financial position to do so.

One other thing regarding the comment about getting one when buying a home. I always tell any seller that if a buyer is requesting that the seller pay for a $500 HOW that they should just consider that a $500 reduction in the offer price and adjust their acceptable final selling price accordingly. In other words, mark up your house $500 above your lowest acceptable price in order to pay for the HOW. Basically, the buyer ends up paying for the $500 as the seller would have taken less if the buyer hadn't requested it.
Title: Re: Home warranty v. "self insure"
Post by: fxsts12 on January 31, 2015, 04:29:56 PM
Drop the warranty asap unless you have 20 year old HVAC  and appliances. Every year you have $500+125 diagnostic  fee toward appliances. Within a couple years everything  should be relatively new. I dont keep it on rental properties with 25 year old HVAC. The caps on big ticket items make it less attractive and fees not included in the diagnosis  like soldering are separate. Keep the cash and create an appliance  fund.
Title: Re: Home warranty v. "self insure"
Post by: escolegrove on February 06, 2015, 10:30:13 AM
Be careful with the warranty! We have had alot of problems where they won't cover stuff, aren't not quick on the repair (think weeks), etc For us we do MUCH better self-insuring (5 houses at $500 a pop). Than having home warranties and their contractors :)
Title: Re: Home warranty v. "self insure"
Post by: pipercat on February 06, 2015, 11:30:14 AM
We dropped our warranty just before our HVAC went out.  This was a deliberate choice.  The warranty company would only pay for repairs (at $125 per visit), so we had been going that route for several years.  We finally decided that we would just drop the warranty and use the savings to pay for a new HVAC.

We have no regrets about cancelling the policy.
Title: Re: Home warranty v. "self insure"
Post by: Ozstache on February 06, 2015, 02:42:37 PM
Insurance - an ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table.
Ambrose Bierce in:The Unabridged Devil's Dictionary, University of Georgia Press, 1 December 2001, p. 133.

You know when you go to Vegas who the odds favor.  It is the same with insurance.  The game is designed to favor the house.  If you can afford the risk (and it sounds like you certainly can) why would you want to make a donation to your friendly home warranty company?

That's a classic way of putting it!