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Tips on shopping for a home warranty that works for you

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HOUSTON – You put in a lot of work buying a home, from finding a reputable realtor and putting down an offer to selecting the right lender and then moving in. But protecting your investment is just as important, so the experts at House Method say before you buy a home warranty, you should ask yourself these five questions:

Do I already have protection?

Appliances in new homes may already be covered. And according to House Method, even if your appliances aren’t new, they may still be under warranty if you made the purchase with a credit card. That’s because some credit cards extend warranty length.

For example, many American Express cards add up to 24 months of coverage (to a manufacturer’s warranty of two to five years) on items you purchase with it.

How much will this warranty cost?

The answer depends on the kind of plan you buy and the provider you choose. You can generally purchase one of three kinds of home warranty — a plan for a particular appliance, a plan for all your appliances, or a plan for your appliances and your plumbing and electrical systems.

Prices may also vary depending on where you live. The American Home Shield website, for example, says a plan that covers most major appliances runs about $420 annually for a home in the Houston area. A warranty that also includes the home’s electrical and plumbing systems costs close to $540.

By contrast, a homeowner in Westchester, New York, might pay $900 to cover major appliances and $1,020 to include electrical and plumbing.

In addition to the cost of the plan, there are probably going to be additional expenses. If you have a problem with an appliance or system, even one that's covered, you’ll have to make a copayment when the contractor comes in to do the work. Those fees range from $60 to $125 depending on the work that needs to be done, according to the plans we examined.

Am I clear about what the warranty covers?

Most of the complaints that the Better Business Bureau receives about home warranties stem from the fact that consumers don’t understand the coverage their plans provide.

The takeaway: Be sure to read the terms and conditions carefully. When House Method examined home warranty plans, it found that some policies will cover your refrigerator but not the icemaker that comes with it. Other policies may cover your hot-water heater but not the water tank itself.

Sometimes, if your appliance breaks under certain circumstances, it won't be covered. An oven, for instance, may not be covered if it stops working while in self-clean mode or if it's damaged by a power surge, according to the plans we looked at.

How you care for your appliances may also matter. If you failed to perform routine maintenance or if an appliance wasn't properly installed, the home warranty provider could argue that it can refuse to pay for repairs. There could also be a pre-existing condition—even if it wasn’t evident to you when you bought the home warranty—that allows the provider to deny coverage of the item.

Will this plan repair or replace a broken item?

Most home warranties explain that if a repair is considered too expensive, the provider might offer to replace the broken item instead. But in a situation like this, the home warranty company may give you only the depreciated value, requiring you to pay the difference out of pocket to get the same model you had before.

Are there limits on how much this plan will pay out?

There are, but they depend on the kind of plan you purchase and the provider. Over a 12-month membership term, the plan from America’s First Choice Home Club, for example, pays up to $2,000 to access, diagnose, repair, or replace each covered item.

Tonight on KPRC 2 News at 10pm, KPRC 2 Investigates takes a closer look at home warranties in Texas, complaints consumers have, and why one lawmaker has concerns about who’s regulating the industry. We’ll also introduce you to an attorney general who’s taking on the home warranty companies and what he says are questionable coverage decisions.