Home Warranty Scams: Suspicious Companies (2022)

Home Warranty Scams: How They Work

A home warranty plan is a contract which ‘pays for the repair or replacement of covered home systems and appliances, typically for a period of a year at a time.’ These highly sought-after contracts offer homeowners peace of mind, mainly when the home warranty plan covers older home systems and appliances.

As electromechanical units, kitchen appliances, and plumbing systems age, natural wear and tear take their course. A home warranty plan is designed to provide necessary protection against high maintenance, repair, and replacement costs.

Home warranties typically cover multiple items including electrical systems, kitchen appliances, plumbing systems, washers and dryers, heating and cooling systems. Basic plans are generally affordable, with prices rising sharply for additional coverage.

A home warranty plan, like any other type of insurance, is a grudge purchase. You get nothing from paying the monthly premium unless your systems and appliances stop working, in which case you can file a claim to mitigate the costs of repair or replacement.

It’s at this juncture where reputable home warranty companies are separated from the scam artists. Unbeknownst to many people, not all home warranty providers are credible. Many of these companies make lofty promises to policyholders, yet they fail to deliver on expectations. For one thing, shady home warranty operators may refuse to repair or replace old items in a home.

What Are the Most Common Complaints Against Home Warranty Companies?

By far the biggest complaint against home warranty companies is their refusal to pay for the repair or replacement of home systems and appliances when they stop working. The policyholder is required to pay the monthly premium, and then pay a non-refundable service fee to the contractor. Sometimes, customers will be required to make a copayment when the contractor arrives.

A lot of the frustration can be avoided by simply picking reputable home warranty providers from the get-go. Word-of-mouth reviews on the services provided by these companies are the most reliable way to choose a home warranty provider. The Better Business Bureau (BBB), consumer watchdog sites, and objective, updated reviews of these companies are beneficial resources to consult.

Let’s look at two of the most common scams regarding home warranty companies:

Customer X pays for an annual subscription to Company ABC. The customer files a claim when the AC unit stops working. Company ABC refuses to conduct the necessary repair or replacement.
Customer Y pays for an annual subscription to Company DEF. The customer attempts to file a claim when a home system or appliance stops working. Unfortunately, company DEF has shut down completely.

There are many other complaints regarding home warranty companies, notably slow response times, poor customer support, substandard repair and maintenance work, and nebulous policy terms and conditions. That’s why it is especially important to be 100% clear about what your home warranty covers. The Better Business Bureau (BBB) routinely receives complaints about home warranty plans, and often customers don’t understand what their coverage entails. Incorrect installation of home systems and appliances, electrical surges, pre-existing conditions, and other terms and conditions may disqualify you from coverage.

Coverage limitations are also in effect, so having a home warranty plan is not a blank check to repair or replace all of your home systems and appliances if they happen to stop working. Home warranty plans are not uniformly priced throughout the country. Certain states like New York and California have much higher annual premiums than other states like Florida. It’s important to research the leading home warranty companies in your state thoroughly.

Reviews of their services and their payment honoring system are equally important. Reputable home warranty providers include companies like Allied Home Warranty, American Home Guard, Secure Home Warranty, Endurance Home Warranty, and Service America Warranty. Each home warranty company must be assessed on its merits to ensure that it provides the coverage you need for your home systems and appliances. Affordability is another factor to consider. This includes the monthly premium (or annual premium), and service callout fee.

It is crucial that you thoroughly read the terms and conditions of every home warranty plan you are considering before you sign on the dotted line. Scam artists have been operating in this field for many years. They prey on people who think this is an affordable way to provide them with an affordable way to repair or replace their systems and appliances.

While there are many great operators in the mix, scammers are an ever-present reality too. Much of what the scam artists do is misleading marketing. Sometimes, scam artists will aggressively market their services to the elderly, or first-time homebuyers. The negative side of home warranties includes the following complaints:

Repair delays
Payment delays
Unexpected repair costs
Unprofessional contractors
Communication problems
Confusing terms and conditions

Many issues need to be tackled before simply signing up with a home warranty provider, notably:

Is the home warranty company licensed and regulated?
What does the fine print of the home warranty policy say?
Understand what systems and appliances are covered by your home warranty plan
If possible, request at least 3 contractors and pick the most reputable one from the list
What is the annual cost and what is the out-of-pocket expense (service fee) per claim
Are pre-existing conditions included? What exclusions apply? What about consequential damages?

Home Warranty Scams: How To Report

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