Home-warranty ads claim that obtaining this type of coverage shields home owners against the high cost of home and appliance repairs. But when parts of your home break, having one of these policies—which typically costs $600 to $1,000 per year—is more likely to cause you frustration. Three big problems…

Big-ticket repairs tend to be covered poorly, if at all. Exclusions and caps hidden in the fine print mean that many home repairs are not covered—and the pricier the repair, the less likely it is to be covered. Examples: Roof leaks and basement moisture problems, ­issues that can cost many thousands of dollars to fix, often are excluded. Heating and air-conditioning repairs frequently are capped at just $1,500 per year. 

There are hefty co-pays. Home owners must shell out a co-pay of at least $75 to $125 every time the warranty provider sends a repair person or contractor, even if the repair service claims that the work isn’t covered by the warranty after all—which happens regularly because of the many exclusions. 

Home owners can’t pick their own repair pros. The warranty provider typically decides who does the work—which often results in shoddy work, judging by the volume of complaints. And because these repair people answer to the warranty provider, not the home owner, they are more likely to declare that repairs are not covered by the warranty.

What’s more, home warranties usually contain language absolving the warranty provider from any liability if the repair person it picks accidentally damages the home or bungles the repair. Example: One home owner reported that the repair person sent by her warranty provider to unclog a pipe instead got his snake stuck inside the pipe—then simply cut off the stuck snake line and left. When she asked him to return and remove it, he said it would cost her $750. 

What to do: Don’t buy a home ­warranty —they don’t make financial sense. Policy holders receive only around 50 cents in services for every dollar they pay in premiums, based on the financial filings of publicly traded companies in the sector. Exception: There’s no need to avoid home warranties offered by home builders on new homes at no additional cost. 

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