Do I need a home warranty?

In my opinion not every home needs a home warranty.

For example, if your home is brand new then you probably get a builders warranty for at least the first year. If you purchase a resale home then it may make sense in cases to look into purchasing a home warranty.  Some Realtors and clients swear by home warranties.  I tend to lean in the other direction. 

In my line of work I have often seen the warranty company either not cover everything that they said they would or make you jump through so many hoops that it is not worth it.  An example of this is a client owned a home built in 1959.  From about 1994 she started using a home warranty.  Every year she renewed this until she finally sold the home in 2009.  During that span of time she had two big ticket claims.  One was for an a.c. unit and the other was for a furnace. 

Most people reading this are probably thinking "she got her monies worth then".  At first glance I would think the same thing, but upon taking a closer look at the numbers below you can see what a bad deal she got. 

15 years at an average of $400 per year equals $6000.  Even $6000 over a long period of time would be ok, but then comes all the other issues.  This a.c. was clearly at the end of it's life in 2004, yet they still refused to replace the unit.  It took 11 more service calls at $55 a piece before they finally agreed to install a new unit.  This added up to $550 on top of all the time and frustration wasted trying to get them to do what they promised in their initial contract.  When it got replaced they installed a smaller unit based on square footage only and didn't take anything else into account.  To top that off they made the client pay for the crane.  This cost the client over $1000.  By the end it cost my client spent around $8000 for coverage that I could have paid $4000 for. 

I would only recommend getting a home warranty in a few occasions.  The first is if you don't have the money to cover a major expense like an air conditioner or heater.  The second is when your buy a resale home and the seller is willing to add that in as part of  the purchase contract  at no cost to the buyer.  The reality is that you can find more reliable vendors through friends or networks like Angie's List!

Of course, this is just my opinion on the topic.  If you have any examples (good or bad) that you would like to share I would love to hear them!