Ounce of Prevention: Home Warranty Plans

Brokers often ask what they can do to avoid the bottomless pit of claims and lawsuits. They specifically ask if there is any one thing they can do to avoid falling into this bottomless pit. Unfortunately, there is no one thing that can be done. No matter how much dirt you throw into a bottomless pit, you cannot fill it up. With this in mind, there is no guarantee you will not fall into this pit.

What you can do, however, is create a series of safety nets to hopefully catch you if you should happen to fall into the pit. There is no certainty that any one of those safety nets will protect you. At the same time, there is hope that if you have enough of them in place, one will ultimately protect you from falling all the way through the pit to a judgment against you.

One of the better safety nets is a home warranty plan. Home warranty plans are one of the areas where the buyers and sellers, along with their agents, have an opportunity to protect themselves from the risks of defects and resulting claims.

As a general rule, for a modest annual fee (generally under $500), a home warranty company will agree to repair defects which arise in connection with the normal wear and tear of appliances, along with the property’s major systems. These systems include electrical, plumbing, heating and air conditioning. In addition, most home protection companies provide the opportunity to purchase protection for other items such as swimming pools.

Home warranty plans provide benefits to the buyers by giving them a certain degree of security and predictability concerning the condition of the property they have purchased. For a modest co-payment (generally under $50), buyers can contact their home warranty company whenever they have a problem with a covered appliance or system. The home warranty company will generally refer the matter to a qualified technician who will evaluate and repair the problem. In those cases in which the problem cannot be repaired, the home warranty company may even pay to replace the item(s).

Home warranty plans provide benefits to the sellers and the respective brokers, as well. Many lawsuits are the bi-product of a modest problem with an appliance or a system. Perhaps the air conditioner is not working, or there is a problem with the dishwasher. Regardless of the specific problem, it will frequently evolve into a large claim. The buyers will go to their cousin Ernie, the attorney, to discuss the problem.  Old Ernie will evaluate the problem and note that the damages are under $1,000. He will pull out his abacus and start moving the beads to determine what his share will be on the claim. Ernie, being a clever and self-serving chap, will notice he is only getting $300 worth of beads. This, in turn, will cause Ernie to find ways to inflate the case into a claim for tens of thousands of dollars.

If, on the other hand, there was a home warranty plan, then the buyers would have an easy and efficient avenue to address their problem. They could call the home warranty company who would send a technician to attempt to correct the problem. This, in turn, would hopefully keep the abacus out of Ernie=s hands.

Of course all of these benefits are greatly impacted by the choice of home warranty companies. In recommending a home warranty company, it is important to consider a number of issues. First, the company should be an established and respected national entity. Second, it should have easy access for anyone to contact its representative. In this regard, the company should have someone available to handle calls at all times. Once the company receives the consumer’s call, it should be able to refer that consumer to an experienced, licensed and insured technician within a reasonable period after the call.  In addition, the company should provide a clear statement of coverage and the costs within its plan and upon any call by a consumer. If a home warranty company meets these criteria, then it is likely to meet the needs of all parties.

As stated above, there is no way to guarantee that you will not step into the bottomless pit of litigation. With this said, anything you can do to keep Ernie’s hands in his pockets, and not yours can be viewed as a safety net.

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