Home warranty might not pay

Read carefully: The devil's in the details

As the thick heat of summer drags on, how much do you trust your air conditioner not to break?

If you have a home warranty, you might not worry about this sort of problem.

But the fine print on the warranty contract is critical. The most common complaint about home warranty companies is a denied claim, said Tom Bartholomy, president of the Charlotte region's Better Business Bureau.

A home warranty typically covers appliances and utilities in a home, such as the air conditioner and plumbing. If a covered item breaks, the home warranty company hires a local contractor for the customer, who pays a service fee for the visit. The cost of the repair is covered by the warranty company.

The warranties have become a common amenity in home resales, said Will Martin, legal counsel for the N.C. Association of Realtors. A clause regarding warranties was recently added to the standard real estate agent contract, he said.

Homes advertised with a home warranty typically sell 60 percent faster than those without, said Susan Larkin, a spokeswoman for Allen Tate Realtors of Charlotte.

The warranties give homeowners some insurance against emergency expenses on home repairs, which can be helpful in the first year of owning a home, especially after the initial expense of buying the home and moving in.

Exclusions are the rub

But home warranties don't cover everything that might go wrong with your appliances, and the contracts have exclusions homeowners might not know about.

The exclusions can include certain parts of an appliance; for example, the innards of an air conditioner typically are covered, but the condenser housing -- the metal box around the outdoors unit -- might not.

Eric Lattimore of Charlotte said his warranty from American Home Shield was worth the money. His washing machine broke down twice in one month, but, Lattimore said, the second service fee was waived. The warranty is helpful, he said, because "when you try to run on a tight budget and something unexpected comes up, it can be hard."

The only way to know whether a home warranty is worth the investment is to read the contract, Bartholomy said. Warranties usually run about $500 a year and have service fees of about $50.

Complaints in the home warranty industry are common, which isn't surprising given the value of the investment in the home, Bartholomy said. His bureau received 84 complaints about home warranties in the past year.

A 'problem industry'

Home warranties are considered a "problem industry, because there are many players in that industry that will go to great lengths to deny your claim," he said.

American Home Shield spokeswoman Susanna Weston said the best way to prevent a denied claim and avoid a "negative surprise" is to read the contract. She said AHS started the home warranty industry 32 years ago, making it the "oldest and biggest" home warranty company.

She said AHS has been working to make sure customers read their contracts and know exactly what is covered by their warranties, and what isn't.

"Denying is the last thing we want to do," she said, "because our goal is to get you to renew" your contract.

AHS customer Jan Westwell of Charlotte said problems with her home warranty arose when contractors did not install parts according to building codes. She said she had an AHS policy for 10 years and has called for service 14 times.

When Westwell tried to sell her house, she said, an inspector told her the water heater pipes, which had been installed by an AHS contractor, were not built to code. Westwell said she called AHS several times and was denied, but her real estate agent was able to negotiate some reimbursement.

AHS account executive Helen Polito, who handled Westwell's case, said she agreed that Westwell's complaint had merit and offered to reimburse her.