Service Line Coverage for Homeowners

The hard sell on home warranties is on TV and in your mailbox. Some of the direct mail items look like bills or seem to be from a utility company. All share the scary stories about how owning a home is now a nightmare because of repairs. The answer is buying a home warranty product. This a truly a time to read before you buy. Do not rely on the advertising, look at the actual product to see what is being offered.

Limits Can Be Low

These products have specific limits for each type of service line or home system covered by the program. A review of a major provider’s product indicated separate limits for different home systems and service lines. The limits were a maximum of $5,000 per incident / annual aggregate. Limits for some exposures were less.

For underground lines, a $5,000 limit was also applicable to opening and closing public streets and roadways. Depending on the type of pavement present, this could be insufficient for the repairs.

 You may end up paying for a limit that only covers part of the costs.

Roof leak repair was limited to $1,000 maximum and was offered on only the costliest program.

Exclusions May Apply

For most systems, the home warranty will limit or exclude some types of losses or sublimit your recovery. One plan limits refrigerant replacement cost at $10 a pound, which is much less than the actual costs of the product. There can be exclusions for certain types of systems, and you must see the actual agreement to understand these limitations. The sample agreement is not front and center on the marketing sites. You have to look closely to find your way to the sample agreement. One major provider excludes coverage for sewer lines that collapse and repair cost from root damage.  Other plumbing exclusions included bathtubs, sinks, shower bases, and enclosures.

Claims Handling

You may be obliged to use the service line warranty company’s contractors to do the repairs. This removes control over the claim from the customer. If you ask for a second opinion, any costs related to providing that second opinion are deducted from your per event limit. If you engage your own contractor to make repairs the program may not respond to those costs. If you dispute the claim settlement you have to choose between small claims courts or binding arbitration. The small claims court is to limit the size of any recovery. One agreement even had a hammer clause that if you disputed the settlement and the outcome of the settlement was less than the original offer, you paid the legal fees for the service line company.

Cost

These programs are priced by zip code, and not with any real detail on the property being covered. There is no rating worksheet provided so you cannot see how the premium was developed.

This is Not Insurance

These products are warranty programs, not insurance. There may be a surety company standing behind the program who would step in if the warranty program fails to perform, but there are steps to follow and time limits related to determining a default by the warranty company. You do not have the protection of state regulators as with admitted insurance companies.

Your Homeowners Policy

Personal lines insurers are offering service line coverage on some comprehensive homeowners’ forms. A previous article on homeowners forms, What's in the form?, discusses the different homeowners coverage forms.

One carrier offers a $25,000 limit for this exposure and the claim handling and settlement terms are the same for the balance of the policy. The cost for this is imbedded in a broadening endorsement that has other coverage extensions. This is a better limit, cost, and claim situation for you. This endorsement specifically includes losses related to root invasion, line failure due to breakage, wear and tear and rust and corrosion.

The Driehaus Difference

We take time to help you understand the options that are available to you in protecting your home. We can help you find the right insurance company, the right policy forms, and the most competitive costs. We do not provide prices based solely on your zip code. We need to spend some time with you to understand your exposure to loss and how we can build a program to protect your interests. This is not a “fifteen minutes will save you 15%” undertaking. We are willing to invest our time and expertise in helping you. You need to invest your time in sharing information with us to get you to the right insurance program.

Call us at 513-977-6860 or use the contact tools at www.driehausins.com to get the process started. We want to be your insurance provider.