Home Warranty Regulation

Understanding the Laws for Home Warranties

Last updated August 29, 2018

The home warranty industry have undergone major scrutiny in recent years due to a number of cases in which home warranty scams became public, and several lawsuits have been filed against leading companies. It difficult to call home warranties a tightly regulated area, though. The type of regulation that an insurance company has to adhere to is still a lot more demanding than what a service agreement provider has to deal with.

In this article, we will help you understand the current state of affairs when it comes to home warranty laws and regulations. We will also try to explain how to complain about a company misuse or abuse of contract, and offer our own insight as for what can be done to ensure the regulation and laws in place actually make this space safer for clients.
Words of caution: This piece deals with a very sensitive topic. We are not legal expert, nor financial advisers. Whether you pertain to use a home warranty company, submit a complaint about one, or even start your own home warranty company – you are more than welcomed to use this readily available and free-to-use information, but we will not be held responsible if you decide to act upon it. 



The Basics: Home Warranty Regulation is On a State-by-State Basis

For starters, what is important to understand about home warranty laws within the United States is that there are two bodies of law that can govern items such as home warranties, which are the federal and state laws. At times, these are one in the same; however, what typically happens is the federal government sets a threshold that the states can decide how to regulate within their own jurisdiction so long as it does not violate federal law. Hence, with the lack of any federal law pertaining specifically to home warranty service agreements, home warranty laws are fully statutory.

I.e. not all home warranty providers in the USA comply with the same laws. It depends on which states they are operating in. Below you can find examples of three leading home warranty companies that operate in different jurisdictions:

You could read more about these companies on our reviews, where this map also becomes interactive and is updated in real time based on updates from the companies: Select home warranty, Total home protect, and Endurance home warranty.


Which states have relevant laws and regulations in place?

Home warranty regulations are difficult to find because different states put under different sections of the law. In Florida the department handling home warranties is the Florida Office of Insurance Regulation, whereas in Texas it’s under the Texas Real Estate Commission. In New York, you can find it under the insurance law again, and the department regulating it is the Department of Financial Services. In Georgia, you can find these laws relating to “home service contracts“. We have found claims over the internet that in most states, home warranties are covered by the Commissioner of Insurance in that state but we haven’t been able to locate the state laws in most instances and thus, we cannot say whether this is true or a rough generalization. To summarize, it is very difficult to compile a list of relevant laws and compare between them because they have a different structure and they are governed by different bodies.

We recommend that before before selecting a home warranty company, any prospective customer would research locally for the laws in his home states and check whether they defend him. It’s true that laws per definition are filled with legalese making it (intentionally) difficult for the common folks to fully comprehend but below you can find some guidance on how to check if your statuary laws are defending you on home warranty contracts:
  • Check that there are minimal requirements to offer home services, i.e. sufficient funds, sufficient expertise, sufficient staff.
  • Check that there are specific instructions relating to policy cancellations i.e. it is possible to get out of the contract if you are discontent with the services provided.
  • Check that there is an easy way to ask for resolution in case a client feels the company did not stand up to its contract.
  • Check that there limitations on misrepresenting the service contracts whether in direct sales or advertising.
  • Check that there are set response time in which the home warranty company needs to respond to service calls.
  • Check that there are requirements in place for the professionals that a home warranty company can hire for the job.
  • Check if there are specifications on the time-frame in which a home warranty company needs to approve or reject a prospective client applying for a warranty.


Important to remember: the home warranties that we are referring to are extended appliance and system warranties, not a new home builder’s warranty which is a completely different thing broadly discussed here.


Nation-wide organizations try to provide standartization

NHSCA, The National Home Service Contract Association, a non-profit organization, offers a form of self-regulation for home warranty providers. The organization offers a Code of Ethics that promotes ethical business practices for this industry. We feel it’s a good step in the right direction but without clear indications about the requirements which companies have to adhere to, it’s difficult to say whether a company that is registered with NHSCA is any more credible or better-regulated than companies which aren’t. One thing we can say for certain is that companies which are registered with the NHSCA have an easier complaint-resolution system than others because clients can complain directly at the NHSCA site.


Home Warranty Regulation vs Insurance Company Regulation

It is very common to think of a home warranty company as a variation of an insurance company. After all, the same basic concepts apply. With home warranties, you pay a monthly premium plus deductibles and get a sense of security that you will not run into major expenses because you are covered; with any type of insurance, whether it is a home insurance or a car insurance or even a life insurance, you do the same – pay a monthly premium and deductibles when needed to keep you safe from a one-off expense that has a deadly potential for your budgeting.

The aforementioned NHSCA is definitely attempt to separate home warranties from insurances and fight for separate regulation between the two, but it seems that some states don’t differentiate between the two, and home warranties are still governed by the same laws and regulators that apply to the insurance industry. This is another state-by-state case.

The biggest difference is that there are no federal laws relating to home warranties, while insurance companies have to be licensed by The National Association of Insurance Commissioners, and the Federal Insurance Office (at the Department of Treasury). Insurance companies are also supervised by the FSOC that ensures there financial stability of these bodies.

The most important takeaway from this section of the home warranty regulation and rules is to remember home warranty companies do not have to go through the same ionization as do insurance companies, and as such they are, per-definition, riskier to deal with in comparison to insurance firms.

Summary: Is Regulation Tight Enough from Home Warranty Companies?

Our research about home warranty law discovers that there is nothing at a federal level which leaves, in our opinion, too much leeway for statuary laws. As things stand today, there is no well-defined legal framework that all states have to follow. That means that it is up to the local legislator and that leaves a lot of room for error. We suggest that there would be something set up at a federal level, because at the current state of affairs there are still way too confusion in the industry, and too many companies are taking advantage of that confusion.

Without a proper regulation, the only thing we can do is recommend to do a comprehensive search about the company you are considering using and stick to short-term contracts. We can help you conduct that research!

Read Home Warranty Reviews

We at ReviewHomeWarranties have compared and rated more than 20 home warranty companies to date.

Check out our comprehensive reviews to learn the ins and outs of each company on your own.

Discover The Industry Leaders for Home Warranties


 How to Complain About Home Warranty Companies

There absolutely is a possibility to litigate a home warranty claim; however, it is important to assess whether the legal costs will be worth the settlement payout. Many cases related to home warranty regulation will end up in Small Claims Court due to their low monetary value. That said, it is worth contacting an organization such as NHSCA to report fraud on any home warranty transaction to protect U.S. consumers. Another way to file a claim against your home warranty company is to contact your State’s District Attorney’s Office. Doing so will enable to you establish whether it is worth it to take your claim to court.

An example of a court case related to home warranty law in California in which the home warranty company attempted to get it dismissed on procedural groups was Diaz v. First American. This case provides a great example of how difficult it can be to litigate these claims and why it is important to ensure the monetary amount in question balances out the costs of your attorney’s fees. That said, in Illinois, the Supreme Court just made a bold statement about implied warranties and their scope in Fattah v. Bim. This case held that home buyers are protected by an implied warranty for defects of up to 14 years and that any limitations must be written into the purchase contract for them to be enforced, which includes the rights of a subsequent buyer.  

Please note, if you were to contact us with inquiries or complaints about any of the home warranty companies appearing on our list of providers by rating, such as Choice home warranty, Select home warranty, American Home Shield or Total Home Protection we could make an effort and contact them to try and clarify the issue but we are by no means able to force any of the companies to do anything. We are not a regulated mediator. We do aspire to become one, one day, maybe, but for the time being you should know that before contacting us.


Final Remarks on the Subject

Home warranty law will be an area of law that is absolutely worth watching in the coming years. This is particularly true as insurance companies periodically deny their beneficiaries coverage. Home warranties on the surface look appealing; however, they have been historically loosely defined. What is important to be aware of when purchasing real estate in a given state is the state’s policy on implied warranties, statutory warranties, and express warranties.

From there, you will be able to research the best home warranty company to work with, should you decide it is worth it, and then be protected while simultaneously being aware of your legal rights associated with your home warranty.