Using a home warranty after your retirement

For most Americans, retirement isn’t the glamorous affair depicted in mutual fund commercials. According to a 2018 study commissioned by Northwestern Mutual, the average American nest egg is only worth a little over 84,000 USD. Even worse, 21% of Americans have no retirement savings at all. These stark facts mean most can expect to be on a fixed income when we retire.

If you find yourself in this situation, you find ways to make your monthly social security check last. From taking on a part-time job to taking advantage of early-bird specials, you manage to make it work.

However, home maintenance has been killing your budget lately. As your home has aged, its problems have multiplied. First, your 20-year old central air unit failed. Then, the oven died. That’s thousands more than you expected to take out of your life savings, just in one year. What will the future hold?

Thankfully, there is a better way. A home warranty can restore stability to your maintenance budget, and can even save you money in some cases. In this article, we’ll show you what to look for as you shop for the perfect plan.  

What is a home warranty?

Ever since you became a homeowner, you’ve had an insurance policy that protects it. If your home gets ransacked by thieves or a power surge fries all your electronics, you’re covered. However, it doesn’t protect you from wear & tear expenses. If your fridge kicks the bucket or your roof begins to leak, that’s on you.

As understandable as that may be, it doesn’t make the ensuing bills any cheaper. If your furnace quits and a replacement is needed, that could ding you for 5,000 USD. Running new wire after the old stuff shorts out can run between 3,500 to 8,000 USD – or more.

As someone on a fixed income, these expenses can be problematic. As a result, home warranties are becoming increasingly popular with Americans. Home warranties are firms that take care of the logistics and costs of home maintenance. In return, you pay a monthly/annual premium, plus a service fee for each call.

For this reason, some compare home warranty firms with insurance firms, despite differing business models. In both cases, you pay premiums monthly, plus a deductible when you claim.  

Home warranties are beneficial to retirees

With less money coming in each month than when you were working, retiree life can be financially challenging. As time goes by, you learn to scrutinize each expense, finding efficiencies wherever you can.

Do you live in an older home? If so, signing up for a home warranty may prove to be a financially astute decision. The ReviewHomeWarranties.com maintenance calculator projects the average cost for a 20-year old home to be 1,732 USD. For a 50-year old house, that figure jumps to 2,165 USD.

Meanwhile, home warranty expenses are lower in each instance. According to the calculator, the annual premium is 650 USD. Add in service fees (industry maximum of 100 USD x 5 visits), and you’ll pay no more than 1,150 USD per year.

However, even if you downsized into a smaller (but newer) space, home warranties may still make sense. The biggest perk of this arrangement – it takes the unpredictability of home-maintenance costs out of the equation.

Some years, you barely recall spending anything. In others, you blew through thousands of dollars. When your household had one/two incomes, the more expensive years were annoying but manageable. However, now that you’re retired, these same expenses could severely impact your quality of life.

When you have a home warranty, your annual maintenance costs are static (less service fees). As a result, you can live your best life without worrying so much about saving for a rainy day.

Buyer beware: why you should vet home warranty firms carefully

Home warranties sound swell – and they are. However, we won’t lie to you – this industry doesn’t have the best reputation. Great firms exist, but others look for any excuse to stiff their customers.

Take a recent customer’s experience with Home Warranty of America, for instance. Of the 700 USD they claimed on an air conditioning repair, they only got reimbursed for 120 USD. Even HMS National only gives you 1 day to submit claims.

A few companies go out of their way to limit and deny claims. To avoid headaches, always read the fine print. By reading, you’ll find caps, exclusions, and other legalese that might make a company unsuitable for your needs.

What should I watch for when shopping for home warranties?

So, you’ve decided to get a home warranty – great! As laid out above, some home warranty firms have prioritized profit over serving the customer. Fortunately, if you play your hand smartly, you’ll be able to find a legit firm that meets your needs.

Start by checking review sites online. Trustpilot stands out, as it has become a respected authority in gauging the reputation of online firms. Companies on this service encourage satisfied customers to review them. So, if you find nothing but poor reviews, you may wish to drop that firm from your list.

Once you’ve drafted a shortlist of home warranty companies, apply for a quote from each. Once you receive a draft deal, the real work begins. First, find what’s not covered. Some plans exclude conventional systems and appliances like cooktop fans, toilets, and septic tanks.

Next, identify coverage caps. If you’re opting for a cheaper plan, the coverage limit may be really low (e.g. 400 USD for air-con with Landmark Home Warranty).

Finally, comb through the proposed agreement, line-by-line. Within, you may find problematic terms, like high cancellation fees. If you find a language you don’t like, try to negotiate better terms. If they refuse, move on to another firm.     

Home warranties are useful (if you pick the right firm)

As in other sectors of our economy, some operators are only out to make a quick buck. By taking your time, you can find a home warranty that will make life easier and cheaper for you.

Robert Taylor Smith
 

Robert's motto is to start "with the end in mind." He married the love of his life in December 2016. Together with his wife Tanya, they're putting the building blocks in place for their eventual retirement. He's taken over the mantle at retirementsavvy.net and hopes to share his experiences with our readers.

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