Why American Home Shield is a Rip Off

American Home Shield is a waste of money. My experiences with them have been completely useless. I believe their business practices are designed to maximize their profits at the expense of the home owners and the contractors they hire. This post is an explanation of my latest encounter and a clear example of how they operate. I hope it serves as a warning to others who might consider paying for their service.When I bought my house, the realtor added an American Home Shield (AMS) home warranty. That’s a pretty common offer it makes the home buyer feel like maintenance of the house shouldn’t be a problem. AMS undoubtedly likes this as it is a sale and gets new clients. That’s how I got mine.

Let’s look at how AMS structures these deals. You’re signed up a one year contract. You pay a fixed fee per month ($38 in my case) for the warranty. Then if you have a problem with an appliance you contact them and they send out someone to do the service. Each service call costs you an additional fee ($55 in my case). Then in theory they fix or replace the appliance.

If you take a look at their pricing and plans page you’ll see the appliances they cover and the average replacement cost. Gee this looks reasonable. They could save me a lot of money. Not so fast, not the fine print that says Please read your contract for specific coverages, exclusions, and limitations. You’ll also notice that they don’t show you the contract on the web page. You have to read the fine print on the printed version to see that. That’s where the biggest gotcha lies. Most people don’t read it, don’t pay enough attention to it, or even if they do they put it away and forget about it. That’s particuarly bad when it’s thrown in with your house purchase, because it was a free and you’ve got way to much other paperwork to deal with.

Here’s three of those pieces of fine print that bit me during my time with AHS.

  1. AHS doesn’t cover parts that are considered wear items. So when my garage door had a problem, they sent the guy out to fix it, but he said we needed new springs. Those aren’t covered. So my cost for this home warranty repair was about $150 for the springs and another $55 for the service. Over $200.
  2. AHS only covers the repair itself not the ancillary repairs that might be necessary afterward. When they fixed a leak in my bathtub they had to cut a whole in the wall next to the tub to fix it. They don’t send someone to fix it and paint. We ended up taking a small cash payment and fixing it ourselves.
  3. The contractor gets to decide whether to repair or replace the unit. Believe me they are going to repair anything they possibly can. It doesn’t matter whether it is a lasting fix, as long as you sign off and the contractor gets out of the house, he’s happy. When the water stopped working in the door of our fridge, we called AHS. The appliance guy determined that water had frozen in the hose. He used a hot air gun to defrost the tube, and turned up the temperature in the fridge. Of course, it refroze within a couple weeks.
  4. Finally, if you don’t use their service guys, they can provide a cash payment, but you don’t have any say in the matter. That cash payment is limited in their contract. This one is the big one that finally pushed me over the edge to write this post. Let me explain.

Our water heater broke. We called AHS. They sent out a local repair shop to fix it. Here’s where the problem began. The local repair shop wanted an additional $1000 to fix the water heater. Why? They claimed our water heater was not to code, and needed additional plumbling and drainage. I didn’t believe that. Our water heater is in the garage and had been inspected prior to my purchasing the house. At this point I contacted a local licensed home inspector who looked at the water heater and said that the additional work was not necessary. I called back AHS and explained the problem, and asked them to send out another plumber. AHS refused and said that I had to deal with the one they sent. Since their plumber refused to do the work and I had no hot water I called another licensed plumber to do the work. He bought a new hot water heater and installed it. Total cost was about $500. Then I called AHS to submit the work and was told they’d pay use $200! Let’s look at this more carefully:

First, the plumber AHS sent out was clearly committing fraud. He said we were required to do extensive work that two other licensed contractors said wasn’t necessary. He wouldn’t do the work without that.

Second, I called AHS and explained the situation including citing other licensed contractors and they refused to send out a second plumber. I’m stuck with no hot water and AHS has left me a choice of paying $1000 or hiring my own plumber. AHS supported the original plumbers fraud.

Third, if you look at the AHS website they say water heater replacement costs between $456 and $520 according to a Marshall and Swift. Our repair was right in that range. AHS tells me their cost is $200 and that’s all they’ll pay.

How’s that work? I’m out $555 and it still ends up costing me about $350 for the repair.

I don’t believe AHS is responsible for the fraud, but I do believe they’re responsible for supporting it. They made sure there was no way I could get my water heater replaced for free, even though that’s the intent of the warranty.

I’ve done a bit of reading since this incident occurred and I’m not the first one to have these sorts of problems. One of the articles I read explained how AHS works with their contractors. I can’t vouch for the validity of this article, but it seems plausible. The article says contractors sign up with AHS to get referrals and drum up extra business. The fee the home owner pays for a service call goes to the contractor. AHS also covers the cost of the parts for the contractor. The contractor isn’t paid for the hours involved. So if the service call takes several hours the contractor still only gets the basic fee, in my case $55. Therefore the contractor has an incentive to add on additional uncovered expenses to the bill to pad his rates.

I’ve never actually had AHS replace a piece of equipment, but you are supposed to get the equivalent equipment. For the water heater I replaced we bought an equivalent 50 gal water heater at home depot. That cost over $400. My plumber got a fee for his work as well. If AHS is saying their cost for a water heater is $200, I don’t think I would have gotten an equivalent water heater.

Don’t forget in all these repairs I’ve been paying $38/month for the AHS warranty on top of the costs to the contractors. That’s an additional $456/year. If you use their service twice a year (add another $110) you could have spent $566 with your contractors for the same amount of money. Chances are your expenses are even lower.

One other interesting tactic from AHS. As I mentioned earlier the home warranty is actually a contract. They bill your credit card every month. At the end of the year they automatically renew the contract for you. That makes cancelling their service sort of tricky. You have to pay out the remainder of the year. If you decide you want to stop the service, you’ll typically want to wait until the end of your contract, but if you forget at that point you’re stuck for another year.

I got my AHS home warranty “free” when I bought my house. I didn’t use it at all during the first year. After that I had a few occasions to use it and generally was only slightly unhappy with how the calls were handled. Eventually I slipped in to a bit of a gamblers attitude where I hoped something major would break so I could get my money’s worth. That never happened. I was really unhappy with a few of the repairs, but I was busy and missed my chance to cancel the service at the end of the year. Finally, the water heater incident dragged on all year, and I’ve finally cancelled the service.

Bottom line is that AHS home warranty is a lousy deal. They seem to treat their contractors and customers badly. If you’re buying a house, my suggestion is to ask for $500 in cash instead of the AHS home warranty. I hope this post helps other people avoid making the same mistakes I did allowing my AHS home warranty to continue.

  1. penny cohen at

    I had trouble with American Home Shield warranty. I was told they had to replace my compressor for my heating pump and it would cost me $1060.00. It wasn’t up to code and all of that. Also I believe the service that replaced it didn’t use the right size. My heater is constantly on and I keep it at 65 degrees. You have better make sure you read your contract. They really are not worth. I’m terrified of what my electric bill will read when I get it? I wonder if I should obtain a lawyer?

  2. David Macmillan at

    AHS sent a plumber to my house last week after the handle that operates my shower, came off in my hand, and water was squirting out of the valve and the shower head with no way to turn it off other than shutting the main water valve off. No water for toilets cooking or cleaning. AHS sent out a plumber within 6 hours who told us that it broke from too much force, and that it would cost $700. dollars to fix, and AHS wouldn’t cover as it was my fault. He said he would have to break through the dry wall, and the marble tile to get to the pipe. We asked for a second opinion, and the next guy said the same thing. My 74 year old step father, an retired elevator mechanic came to help, and saw that a retaining clip was holding the broken valve in place. He got it out with my needle nose pliers, turned the water on and the pressure pushed the valve forward enough to easily pull it out. He replaced the broken valve himself, and the shower was repaired for the price of the new valve. Both the plumbers, plus the other repairmen that have come to my home were from the same european country, they convinced AHS not to cover the cost of the repair, and the cost of fixing the problem was tantamount to thievery. I am canceling my contract that I have had for ten years. It has cost my much more than I would have saved by paying up front costs myself.