Home warranty insurance awards: the data unveiled
At the time of writing this report, our database contained full data for 55 home warranty companies, 229 home warranty insurance plans those companies offered, and 57 systems and appliances those plans covered. The total number of rows in the tables was 31,818. We have conducted research on various subjects related to the home warranty insurance industry, including the costs and other expenses, customer risks, and state regulations which may help to mitigate such risks, and also on specific types of home warranty coverage.
Now we decided to take this opportunity and utilize our data in order to single out the home warranty companies which excel in different areas. We are doing it not only to help consumers search for better companies, but also in hopes this will serve as a stimulus for companies in this relatively new industry to improve and compete. We have created home warranty insurance awards in six categories:
- Best Value for the Money
- Most Extensive Coverage
- Most Diverse Plans
- Best Localized Operation
- Exceptional Service
- Best Summary Rating
For each home warranty company in our database, we have 200 to 300 data points, depending on the scope of available information and the number of coverage plans offered. We have carefully selected the above nominations which are not just of interest to the general public but also are quantifiable in nature, allowing an objective approach to determining winners. For each nomination, we have identified a specific metric—a number which can be calculated for each company, and then compared across companies.
To the best of our knowledge, this is the first attempt to distribute home warranty company awards, which are data-driven and transparent. This is also our first report of such nature. We will appreciate any comments or suggestions so that we can improve such reports in the following years.
Best Value for the Money
The most common question that homeowners ask when they start looking for home warranty insurance is, “What company will provide the best value for my money?” This is not an easy question to answer because home warranty prices vary significantly, and the price does not always depend on quality.
In the scatter plot, you can see how prices and quality are related; we can definitely tell that there is a correlation between them. However, there are multiple outliers. Some very expensive home warranties may have insufficient coverage limits, less than perfect customer and contractor services, or inadequate coverage. Alternatively, some cheap home warranties are not that bad in providing basic coverage that many homeowners prefer to buy. There has to be some balance of cost and benefit. This is why we decided to introduce the “Best Value for Money” nomination.
Relationship between company summary rating and average monthly cost of home warranty
Data and Methods
A total of 43 companies which offered home warranty insurance in more than one state and also did not win any other nomination were considered. For each company, we obtained the advertised annual premium cost and deductible (service fee) from the company’s web site. In the case of multiple plans or varying deductibles, the arithmetic means were calculated.
According to our research, home warranty insurance customers file an average of three claims per year. Hence, an estimate of the total effective home warranty annual cost can be obtained by adding the premium to the tripled deductible. For the effective monthly cost, the resulting number needs to be further divided by 12. For example, if a certain company’s premium is $540 and the deductible is $100, the effective annual cost is $840 and the effective monthly cost is $70.
Each company in the RHW database has a rating which is based on multiple factors. Details of this process can be found in the “Best Summary Rating” nomination. This summary rating is expressed in stars with decimal fractions, with a possible range from 0.0 to 5.0.
By taking the ratio of the RHW summary rating and the effective monthly cost,we can obtain a metric for value for the money. This metric was further scaled by multiplying it by $100, so it is expressed in rating stars per $100 spent. Thus, the final formula was
Results and Conclusions
Premiums ranged from a low of $257 to a high of $775 with a median of $464. The distribution was skewed to the left with only three companies’ average premiums exceeding $620. Deductibles ranged from $0 to $125, with most companies deductibles in the $65 to $85 interval. Resulting effective costs were in the narrow range from $40 to $83 per month with a median of $57 per month. Ratings ranged from 2.71 stars to 4.55 stars with a median of 3.34 stars.
The value for the money figures lied in the interval from 4.2 to 8.1 stars per $100 of effective monthly cost. The three companies scoring highest in this metric had a fairly tight range both for the rating (4.31 to 4.55) and effective monthly cost ($54 to $58). Of note, those costs were closer to the middle range among all home warranty insurance companies, while star ratings were more toward the higher end.
The company scoring highest, First American Home Warranty, did not have the highest rating among all companies in the RHW database or the lowest premium or deductible. However, based on the resulting ratio of rating and cost, it was awarded the nomination of “Best Value for the Money.”
Most Extensive Coverage
One of the important characteristics of a home warranty insurance company is how much coverage it provides for the home systems and appliances. On the home warranty market, there are plans that are very comprehensive and cover all the essentials, as well as plans that are very limited in scope, e.g., cover only air conditioner and heater or washer and dryer. Some home warranty insurance plans cover only home systems or appliances while other plans combine the two. Those companies that offer multiple plans may cover the specific item under one plan but not under the other, or offer it as an add-on item only. While purchasing a home warranty plan, it is important to know which items are covered and which ones are available as an add-on option.
Number of items covered by home warranty companies
Data and Methods
A total of 41 companies which offered home warranties in more than one state and provided valid information on covered items were considered. For each company, we obtained information on available coverage plans and on items (appliances or systems) covered by each plan. Additionally, we obtained the list of items for which the company offered optional coverage. Lists were combined to obtain the universal list of items for which coverage is offered by home warranty companies. Then for each company, we calculated the number of items which are covered either by any of the plans offered or as optional coverage.
Results and Conclusions
Some items are more likely to be covered by a plan while others are more likely to be covered as an option. For example, only 7% of companies offer a plan which covers the swimming pool, while 91% of companies offer separate pool coverage. On the opposite side, 98% of companies offer plans with coverage for dishwasher, while only 9% offer optional coverage for this appliance.
When optional and plan coverage statistics are combined, the likelihood of coverage availability still varies greatly from one item to another. For air conditioner, heating, water heater, electrical system, plumbing, washer, dryer, refrigerator, oven, home warranty insurance coverage is offered by 95% or more companies in the RHW database. For television, PC, fireplace, generator, water purifier, and air cleaner, coverage is offered by less than 2% of companies.
The number of items covered varied substantially from one company to another. For optional coverage, the range was from zero (i.e., some companies did not offer any optional coverage) to 18 items with a median of ten. For planned coverage, the number of covered items ranged from eight to 29 with a median of 20. The number of all items covered in any way had a median of 27. The minimum was 15 and only one other company covered less than 20 items. On the other side of the spectrum, three companies offered coverage for 35 or more items.
The highest number of covered items, 39, was observed for Old Republic Home Protection. This company was not the top in either the Optional or Plan sections individually; however, when it came to combining the lists of items with any coverage, it scored highest and was awarded the nomination.
Most Diverse Plans
The majority of home warranty companies sell their warranties in packages known as coverage plans. These plans may include home systems only, home appliances only, or various combinations of both. While it is important for customers to have as many items covered under a home warranty insurance plan as possible, not everybody needs all the items in the package. They might not even have these items at home. This is why home warranty companies need to offer a variety of plans so that customers have an option to choose a package that would cover their particular needs.
Number of different plans offered by home warranty companies
Data and Methods
In order to be considered for this analysis, the company had to be operational in more than one state and have all the necessary information on the available plans on the website. Forty-five companies from our database corresponded to these requirements. For each company, we collected data on each available plan. For each plan, we also recorded information on its type (appliances, systems, or combo) and level (silver, gold, platinum).
Results and Conclusions
Of the 45 companies considered, two companies (4%) only offered one plan, and another 11 companies (24%) offered two plans. Another 16 companies (36%) offered three plans, which was also the median number of plans offered. Four or five different plans were offered by 10 companies (22%), and the remaining six companies (13%) had more than five plans.
Among companies with three or more plans, 6% did not offer any different plans in terms of type or level, 3% offered different plan types but not levels, 41% offered different plan levels but not types, while the remaining 50% of companies offered plans of both different levels and types.
The company with the highest number of home warranty insurance plans, 10, was Fidelity Home Warranty. All of its plans were of the “combo” type; however, plans of all three levels were available. Those plans were otherwise well diverse, and their count exceeded the nearest competitor by three. Hence, this company was awarded the nomination.
Best Localized Operation
Not every home warranty company on the market operates all across the United States. There are companies that operate in less than half of the states and local companies that only operate in the state where they have registered their headquarters. To recognize those companies that have limited state presence yet great service and value, we created this home warranty insurance award category.
Number of states covered by home warranty companies
Data and Methods
For each company in RHW database, we obtained the list of states where the company operated. In instances where this information was not available on the company web site or via customer service, we attempted subsequent quote requests from all 50 states and the District of Columbia and recorded the results.
For each company, we have a summary rating based on the ratings of the company’s trustworthiness, coverage, customer feedback, fine print section, promotions, and editor ratings in the review. More details are available in the “Best Summary Rating” nomination.
Finally, companies operating in less than ten states were ranked according to RHW summary rating.
Results and Discussion
It can be seen from the above graph that most home warranty companies either operated in a majority of the states, or a few states,but rarely in between. Of the 55 companies in the RHW database, 32% operated in 40 states or more, 47% operated in less than 10states, and only 20% of companies operated in 10 to 39 states.
Thus, a total of 26 companies operating in less than 10 states were included in this nomination. Such companies were more often localized in Texas, Arizona, Nevada, or Utah, or a combination of these states. Less often, they were in Illinois, Ohio, or Colorado. Localized companies rarely operated in the eastern states and never in New England or the far North.
For those localized home warranty companies, the median summary rating was 3.3, with a minimum of 2.7, and a maximum of 4.5. The highest rating was received by Landmark Home Warranty, which became the winner in this nomination.
A home warranty company may offer multiple plans covering all essential items, excel in terms and conditions of a written contract, and provide great customer support, but fail when an actual claim is filed. We are aware of a situation where a customer signed a contract which included coverage for plumbing and stipulated a three-day timeframe for repairs, yet when a bathroom pipe was broken, it remained unrepaired for weeks and took several repairman visits.
That is why it is important to introduce a nomination related to the actual quality of repair service. The only sound way to assess companies on this scale is to study their reviews found across the web and sample relevant reported experiences describing the interaction with the repairmen, validating them, and producing summary statistics.
Distribution of percent of “Exceptional Service” tags among all tags
Data and Methods
Our research team routinely accesses 14 consumer reporting sites, including Google Reviews, Facebook Reviews, BBB, Yelp, and others to collect a stratified random sample of reviews about each company. Doubtful reviews, including those with excessive praise or redundant blame amid the absence of factual statements, are excluded. As of the time of writing this report, 1194 reviews for 55 companies were in our database. Each one was analyzed and cataloged according to the covered items involved in the case and overall customer experience. In addition, each review was assigned tags by our team, characterizing the details of this experience. There are a total of 13 tags, of thoseare seven negatives (repair delay, claim denial, tricky terms, communication problems, unexpected costs, unprofessional contractor, payment delay) and six positives (good work, professional contractor, good communication, good offer, fast work, actedin good faith).
For this nomination, we considered 34 home warranty insurance companies that operated in more than one state and had 10 or more tags in their reviews. For each company, wecalculated the percent of three positive service-related tags (professional contractor, good work, fast work) of the total number of tags in all reviews of this company.
Results and Conclusions
Some companies have more reviews on the web than others; thus, more reviews were sampled. The number of review tags per company ranged from 11 to 134, with a median of 41.5. A total of 1807 tags were analyzed. Of them, 382 (21%) were those three related to good service, with “good work” mentioned most often (215 times), and “fast work” mentioned least often (59 times).
The overall percent of good service tags varied from 0% (i.e., there was a company with no reviews which mentioned good service) to 88.2%. For six companies, it was less than 10%, and none of them had “fast work” tags. The top six companies had more than 50% of good service tags. The median percentage of good service tags was 23%. The highest percentage was demonstrated in Pride Home Warranty, which became the winner in this nomination. Out of 17 total tags, three were “professional contractor,” nine were “good work,” and three were “fast work.”
Best Summary Rating
The most popular question that homeowners ask is, “What is the best home warranty company?” The answer, of course, would depend on the needs that every homeowner has, so the best company for one will not be the best for the other. Typically, sites which review HW companies assign some ratings to companies they review. In most instances, the rating comes in the form of a single number—or stars. A few companies have several sections of the ratings which are combined into one number that represents the overall rating for the company. Some reviewers use limited wording to justify those ratings; for others, they are purely subjective. ReviewHomeWarranties is the only site which provides a data-driven, multi-point, automatic rating for each company in our database.
Rating composition for all 55 home warrany companies
Data and Methods
All 55 active home companies which were in the RHW database as of writing this report were considered for this nomination. For each company, we collect 200-300 data points, depending on the number of available plans, covered items, and other details. Based on that data, we created 79 rated items for each company. Of these, 68 are numeric (such as the year the company was established or the amount of deductible), and 11 are categorical (such as hours of operation or availability of online chat).
For numerical items, the corresponding number is scaled to the 0– 5 range (e.g., companies established in 2019 receive 0 and companies established in 1971 receive 5), while for categorical items each value is assigned a value (e.g., companies operating 24/7 receive 5, companies operating on business hours receive 0, companies with unknown hours receive 3).
Those 79 items are further grouped into seven sections, according to the area of the review where they are presented. The Trustworthiness section has 13 rated items, Promotions has seven, Feedback has 29,The Fine Print has 15, Plans and Coverage have 13. Additionally, there are two sections based on the single numeric score—one is the Reader’s rating according to the upvotes and downvotes on the review page, and the other is the Editor’s rating which is a discretionary number assigned by our team based on our impression of the company operation.
To calculate the rating for each of the seven sections, a weighted average of rating values of all related items is taken. Some items are assigned larger weight than others are, e.g., whether a company is accredited with BBB is more important than the availability of online chat. Finally, those seven ratings are averaged into a single number called the “RHW summary rating.”
Results and Conclusions
For Trustworthiness, section ratings ranged from 2.95 to 5.00 with a median of 4.11. Plans and Coverage ratings ranged from 2.92 to 5, with a median of 4.46. Feedback ratings ranged from 2.5 to 5, with a median of 3.93. The Fine Print ratings ranged from 2.5 to 5, with a median of 4.02. Promo ratings ranged from 2.5 to 5, and the median also equaled 2.5 as the most common value—for most companies, the promos were not known. The Editor’s rating ranged from 1 to 5, and the Reader rating ranged from 0.23 to 5.
While ratings for each section were calculated independently and relied on separate data points, some correlations, both positive and negative, between individual section ratings were found. The Editor’s rating was positively correlated to the Reader rating (r=0.427) indicating that our editor’s opinion of a home warranty company generally coincides with the opinion of site visitors. Also, the Trustworthiness rating was positively correlated with the Plans and Coverage rating (r=0.230) and The Fine Print rating (0.229) which indicates that solid home warranty companies are generally more likely to offer better plans and terms. On the other side of the correlation spectrum, the Trustworthiness rating had a negative correlation with the Promotions rating (r= – 0.218) hinting that shadier companies often offer some very lucrative promos. Also, the Plans and Coverage rating had a negative correlation with the Reader rating (r = -0.281) which shows that customers may dislike a home warranty company even if its plans look good in the contract.
Summary ratings ranged from 2.71 to 4.55, with a median of 4.55. Eight companies had ratings less than three stars, and seven companies had ratings of more than four stars. The maximum RHW rating of 4.55 was attained by Total Home protection. Noteworthy, this company’s ratings for the Trustworthiness and Plans and Coverage sections were about average, yet it did well in the other five sections and won the nomination.
Similarly to any type of product or service, selecting a home warranty is not an easy process. Doing online research for “the best home warranty company” may not be sufficient because all homeowners may have different needs for a home warranty, and what is best for one homeowner may not be the best for another. This is why we decided to create several nominations for our annual home warranty insurance award.
We took our best effort to be as objective as possible in selecting the winner in each category. We used a scientific approach to collecting the data. We analyzed it using statistical methodology and selected the winner based on the results of the analysis.
We hope that this analysis will help our customers to select the best home warranty company for them that would meet their needs and requirements.