Improved home warranty is still bad for consumers

Red jigsaw puzzle piece shaped like a house

I've written previously that home warranties are a bad deal for consumers because it's difficult to tell what the policies cover or to get the warranty company to pay up.

So I was curious about a marketing letter from the country’s biggest home warranty company that promised improved service. American Home Shield claims to offer "More choice. Fewer exclusions. More value."

But the changes seem to be mostly smoke and mirrors.

"More choice" means you can select a plan for the home's system components, appliances or both.

You can buy a systems-only plan that covers things like air-conditioning and heating (including ductwork), electrical, plumbing and water heaters.

Or you can purchase an appliance-only plan that covers things like refrigerators, dishwashers, clothes washers and dryers and ovens.

While some of these systems and appliances make sense for a warranty, others (such as doorbells, smoke detectors, ceiling fans and garage door openers) are inexpensive enough that they aren’t worth purchasing coverage for.

Here it seems like AHS is trying to make consumers think they’re getting more for their buck than they really are.

AHS does offer a new custom plan that covers a combination of any 10 systems or appliances.

This is the only option that makes even a little bit of sense. For around $35 a month, you could cover many of the most expensive components of your home that aren’t covered by homeowners insurance.

For the best value, I’d pick these 10 things: air-conditioning, heating, electrical, plumbing, water heater, fridge, dishwasher, clothes washer, clothes dryer and oven/range/cooktop.

The custom plan costs less money than the prepackaged combo plan, where you’re paying to cover systems and appliances that you may not even own, like a built-in food processor, or things that would be inexpensive to replace, like a smoke detector.

But looking at a copy of the company’s plan from 2009, it’s clear that "more choice" is basically just a repackaging of old plan options.

"New pricing options" mean you can now choose a higher annual plan price and a lower service call fee or vice versa.

These options are nice, but they aren’t likely to provide much value.

While a home warranty is not an insurance policy, it is similar in that you’re likely to pay more in annual costs than you’ll get back in coverage.

That's because either none of your appliances or systems will have problems or their failures won’t be covered.

Finally, the "more coverage and fewer exclusions" promise is so vague as to be meaningless.

It says, "The AHS Home Protection Plan can cover more items and conditions with fewer exclusions." That's all it says. There isn't even any fine print explaining what this statement is supposed to mean.

But the fine print does say that "additional charges may apply for some repairs and replacements."

It also says the company may offer you cash in lieu of repair or replacement, but the amount in most cases will be less than retail cost, and items AHS replaces will not necessarily be the same dimensions, color or brand as your original item.

You'd never buy an auto insurance policy that said you might actually have to pay more than your deductible if you get in an accident, you might be offered a cash settlement that's less than the value of your totaled vehicle or your Lexus might be replaced with a Toyota.

There’s a reason why everyone you know has an American Automobile Association membership for roadside vehicle service.

There’s also a reason why no one you know has a home warranty.

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