Why Home Warranties and Smart Appliances Don’t Mix

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Why Home Warranties and Smart Appliances Don’t Mix

Smart refrigerators, such as those in the Samsung Family Hub line, will be a forcing function for home warranty providers as these appliances become more commonplace and homeowners are seeking to protect their investment. Image: Samsung.

Kate Bregovic
10 October 2019
Connected Home / Smart Appliances / Homes / Featured Articles

Home warranties are an effective way to protect yourself from having to pay a huge repair bill for your appliances. However, this protection is limited when it comes to smart devices. As the popularity of the Internet of Things (IoT) and connected homes grows, home warranty providers need to rethink their strategies—otherwise they may become outdated just like the appliances they cover.

Home Warranty Breakdown: What It Is and How It Works

Home warranty plans act as insurance, but you shouldn’t confuse them with actual home insurance. Those policies protect the structural elements of your home. A home warranty, on the other hand, is like a much extended version of a manufacturer’s warranty. The important differences between them are:

A home warranty plan covers multiple appliances and home systems rather than just one.
Home warranties cover repair cost in a variety of situations. Manufacturers’ warranties only cover breakdowns caused by the device’s inherent defects.
Home warranty providers contact contractors and arrange repairs for all the items they cover. So as a homeowner you get to save a lot of time as you only need to report the breakdown.

Home kitchen appliances, such as ovens, microwaves, fans, and refrigerators—can be covered by most home warranty plans. But smart versions of these same appliances may not be covered. Image: Bosch. — Kitchen appliances, such as ovens, microwaves, fans, and refrigerators—can be covered by most home warranty plans. But smart versions of these same appliances may not be covered. Image: Bosch.

This kind of protection costs about $600 a year on average. And the precise list of appliances and home systems covered by these contracts varies depending upon the provider. However, the majority of home warranty companies offer at least a couple of standard plans that include the most common home appliances and systems. They also offer an option to add some specific devices. This flexibility allows customers to create home warranty coverage which will fit their specific needs.

Home appliances and systems usually covered by home warranty plans include:

Washers
Dryers
Dishwashers
Water heaters
Furnaces
Fans
Air conditioning (mostly optional)
Ductwork
Garbage disposals
Electrical systems
Ovens and microwaves
Central heating systems
Plumbing
Roof leaks

Some optional plans even cover luxury items, such as pools or spas. But none of the plans currently on the market cover technology devices which have become integral features of a modern home. These include but aren’t limited to TVs, laptops, personal computers, gaming systems, and, indeed anything digital.

Homes are becoming more populated with smart IoT devices—like the forthcoming Bosch Interactive Projection Module—blurring the lines between appliances and tech, and complicating home warranty coverage. Image: Bosch Sensortech.

You may even struggle to find a plan which will cover a “regular” smart appliance, such as a fridge. Considering the cost of these devices and their repair, it’s in the homeowner’s best interests to acquire similar protection for them. So why aren’t home warranty companies offering it?

Why Is There No Home Warranty for Smart Tech?

As is usually the case with business, if something cool and useful is unavailable it is because it’s expensive. Home warranties are not an exception to this rule. Remember that the companies offering them get money mostly from the same source as insurance companies do. This means that their profit comes from the difference between what they get paid through yearly plans and what they spend on actual repairs.

The issue with home warranties is the same as it is with any similar type of protection, in other words they are a precautionary measure for you. Or to put it another way, paying $600 in annual fees does not mean you will use this coverage during the year. And if you do, there is every likelihood anyway that the repair will cost less. Thus the home warranty provider builds up a fund which will be used to cover expensive repairs when they actually are necessary.

The reason why they don’t cover smart devices in their plans is very simple—they are too expensive to repair. What’s more, smart appliances aren’t generally made to be long-lasting. Manufacturers depend upon customers simply replacing them, thereby bringing them more profit. In fact, many companies today encourage this by offering discounts for new tech if customers hand in their old devices. This is done through various trade-in programs and there are online platforms dedicated to it.

Don't expect your smart tech devices, like smart speakers, to be covered by a home warranty. Image: Sonos. — Don’t expect your smart tech devices, like smart speakers, to be covered by a home warranty. Image: Sonos.

Now, these programs not only offer a discount or a payout but also promote sustainability because the old items are recycled or refurbished and re-sold. And if you factor in the high cost of smart appliance repair, replacing them early does seem like a prudent decision.

So, the high cost of the repairs and the even higher cost of replacement are the main reasons why home warranty companies aren’t covering smart appliances. But there is also another issue that has to be considered. These companies usually have a network of contractors with whom they collaborate. These are the professionals whom they send to your home when something breaks down. Inevitably, the plan will also have a clause where the company will only cover repairs provided by contractors specifically sent by the company.

However, smart tech can usually be repaired only by its manufacturers. Due to its complexity and the limited availability of the replacement parts, regular contractors might have no choice but to send the item back to its home factory. This is part of the reason why the repair costs of smart tech are so high.

Technicians may also need specialized training to fix these devices, and so even the contractors not affiliated to the manufacturer need to be trained by them to become authorized to perform repair work. Obviously this incurs more extra costs and limits the number of contractors capable of doing the work.

Will There Ever Be Home Warranties for Smart Appliances?

Today this kind of protection is unavailable from home warranty companies. However, this situation must change if these companies want to survive.

It’s actually really simple, considering the growing popularity of smart appliances. In a few years’ time every home will have them. And in a couple more, they will have all but displaced traditional devices.

Without adapting to these changes, home warranty companies don’t really stand a chance. Thus they have to find ways to extend their coverage to incorporate these devices.

Those who succeed in doing this sooner rather than later will have a chance to become the new leaders of the industry. Today, the home warranty market is very unbalanced, with the top ten companies claiming around 80% of it. However, there are nearly 200 companies in America alone.

Being innovative and devising a way in which to cover smart homes is precisely what those 190 other companies need to do to bring more balance to the industry. Training their own contractors or affiliating with authorized service centers for smart tech may prove a helpful first step.