Is Home Warranty a Scam?

Updated September 18, 2019

We’ve all been there – you wake up in the middle of the night to a freezing house in the middle of winter when the furnace goes out, or you are up to your elbows in perishable foods when your fridge suddenly stops working. Being a homeowner certainly comes with risks, and dealing with costly repairs and replacements when appliances or systems give out is one of them. This problem is supposedly solved by home warranties. Whereas home warranties are contractual policies designed to protect homeowners against the large expenses of home systems or appliances breaking, they sometimes nothing more than a money pit.

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Scam Home Warranty Companies – Top 5 Worst Companies List

The absolute worst home warranty companies which can be considered as utter scams are fly-by-night type of companies who shut down unexpectedly and leave their customers hanging. It is not an uncommon thing, at all.

Service America Home Warranty   #1

Service America closed down in 2019.

Service America Home Warranty Review
Endurance Home Warranty   #2

Endurance home warranty closed down in 2018.

Endurance Home Warranty Review
Allied Home Warranty   #3

Allied Home Warranty closed down in 2018.

Allied Home Warranty Review
American Home Guard   #4

American Home Guard closed down in 2018.

American Home Guard Review
Secure Home Warranty   #5

Secure Home Warranty closed down in 2018.

Secure Home Warranty Review
Fair Disclosure: has referral agreements with some of the home warranty companies presented on our-top lists throughout the website, including our list of best home warranty companies. Referral income which we generate through these agreements helps us keep the content free of ads and accessible.

What to do when using a home warranty provider?

Finally, because there isn’t any way of truly testing your home warranty company until something goes wrong, there are a disproportionate number of scam artists out there who actively sell scam-policies to lure people in. Some customers who never have anything break or require replacement may never know that they’re the victims of a home warranty scam. This can be frustrating, especially when a homeowner is looking at home warranties because they feel they need the policy coverage and protection.

Tips on Avoiding Home Warranty Scams

  • Avoid scam companies appearing on our worst home warranty company list.
  • Avoid companies trying to oversell you their product aggressively or inaccurately.
  • Make sure the company is properly registered in the USA, and has been in operation for a while.
  • Make sure the company has online credentials and user reviews online.
  • Make sure it’s a veteran company operating for a long period of time.
  • Make sure the company you’re inspecting has thousands of active subscribers at any time.
  • Make sure the Terms and Conditions aren’t confusing or impossible to understand.
  • Check the costs and deductible fees to see they are reasonable in comparison to the average costs of a home warranty.

You can essentially do it all through our home warranty service provider reviews, or have a quick look at the list below.

 Almost-Nationwide Service

 Majority of Client Reviews Online Are Positive

 Clearest Terms and Conditions

 Highest Contractor Professionalism

Best Gold Plan ("Platinum Care")

Select Home Warranty Review

Clients from:  

 Virginia, Alabama, Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wyoming, District of Columbia, California + 13 More States

 Industry Veteran Award

Large and established company

 Top 3 Cheapest Plans ($25/month)

Low optional coverage costs

Coverage is capped at $500

Limited Selection of Optional Coverage Items

First American Home Warranty Review

Clients from:  

 Virginia, Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Indiana, Kentucky, Maryland, Michigan, Mississippi, Missouri, Nebraska, Nevada, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, Wyoming, District of Columbia + 5 More States

24/7 service calls

Lower chance of claim denial

Industry veteran 

Limited social media presence

Limited plan options

2-10 Home Buyers Warranty Review

Clients from:  

 Virginia, Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, District of Columbia + 8 More States
Fair Disclosure: has referral agreements with some of the home warranty companies presented on our-top lists throughout the website, including our list of best home warranty companies. Referral income which we generate through these agreements helps us keep the content free of ads and accessible.


But, are all home warranties a scam? that’s what I’ve been told.

Many homeowners have dealt with home warranty scam artists and crooks over the years, and nobody likes feeling as though they’ve fallen for a long-term insurance scam that leaves them high and dry when they need help covering a huge expenditure. For this reason, home warranty companies don’t have a great reputation. Many home warranty customers feel that they’ve been wronged when home warranty companies fail to assist them when something goes wrong with their home appliances or systems. One news source says that they give homeowners a “false sense of security,” that they’ll be covered should something break.

However, this isn’t always the case. Some companies (the absolute worst home warranty companies) have loopholes in their contracts that ensure they won’t have to pay a dime when you have a large repair or replacement cost looming because it’s a “preexisting condition.” These kinds of horror stories give many people cold feet when they’re considering a home warranty, and for good reason. Nobody would want to pour money into a policy then have your home warranty company back out when you needed them to help take care of a repair that costs multiple thousands of dollars – that kind of situation is incredibly stressful to even consider.

Another reason that can make you feel like home warranties are a scam is their aggressive and sometimes misleading marketing. People receive letters saying “your home warranty may be or may have already expired” and they need to renew it in the next few days or their eligibility will be revoked,  even though they never had a home warranty in the first place. However, many have homeowner’s insurance, which is mandatory in some states.

These marketing campaigns target the elderly population who can be easily frightened and confused, and give out their credit card number even though they never planned to purchase a home warranty and thought they were renewing their homeowner’s insurance instead. Unfortunately, his practice is not used exclusively by the worst home warranty companies but there are constant complaints about the largest home warranty companies in the industry who are overly aggressive in their techniques.


Horror Story 1.0: The Problematic Nature of the Home Warranty Industry

The issue is that home warranties are naturally problematic, as are most businesses that sell insurance policies of any kind. As with any insurance company, home warranty policies can’t cover everything. If a condition is legitimately preexisting, or if a homeowner has wildly mistreated or failed to properly care for major home appliances and systems, that’s a problem. Home warranty companies can’t be expected to cover these sort of system and appliance failures, because they didn’t come about unexpectedly (especially in the case of home appliance or system abuse). That doesn’t make it any easier on the homeowner, but if a home warranty company is, at its core, a profitable business, these things must be considered.

Then there is the issue of how home warranty companies are set up to work when they do take care of your repairs and replacements. By working with a home warranty company, you agree to work with their selected contractors. This gives you, as the homeowner, incredibly limited control over the quality of work and the accuracy of the assessment.

Additionally, because you must go through the home warranty company to have a contractor assigned to your case, you lose the ability to contact a contractor who is available as soon as possible. Depending on the severity of the repair or replacement you require, this can be an issue. Going without water, or having your AC break in the middle of an especially hot July can be frustrating at best and the worst-case scenario is that your home is unlivable for a period.

To summarize, these are the issues that make many people believe home warranties are scam:


What Are the Benefits of Home Warranties?

Despite the nerve-wracking idea that you may be falling prey to a home warranty scam, reputable home warranty companies can in fact save you money. As is the case with any insurance policy, if the homeowner has a need for extra protection and coverage, reputable companies can help to significantly reduce the burden of astronomical home repair costs. For example, should a major system break, or should part of your home’s structure need a repair or replacement, you could be looking at a cost upwards of $5,000 with some top-tier companies. That’s a lot of money, especially if the repair or replacement comes as an unexpected surprise.

Homeowners, especially new home buyers, may worry that there will be an issue with an older sewage system, or they may feel unsure of how regularly key appliances and systems have been maintained or replaced when they move in. In these cases, a home warranty through a reputable company can truly help to defray costs and give a homeowner peace of mind.

Additionally, many homeowners who use their home as their place of business stand to benefit from a home warranty policy. If you live and work in the same environment, and your business is operating on a tight budget (as many small, entrepreneurial businesses do), having an unexpected 4-digit-cost home repair is the making of a nightmare.

Recommended reading: The real coverage by home warranty companies and limits

Additionally, a home warranty can be an easy one stop shop that you call when you need a repair from a trusted professional. That is of course if the company is not a home warranty scam that will send out unqualified professionals or avoid claims.


In every situation, weighing the cost of a home warranty policy against the benefits you stand to gain should something break is key. If you genuinely believe you’ve budgeted appropriately for a large home repair expenditure, then a home warranty policy may not be for you. However, in many cases, there are clear benefits to being covered by a policy from a reputable company. Most homeowners who know they may experience problems with their house stand to benefit from paying a $50-$75 service fee to have a major system or appliance repaired with their policy than paying thousands of dollars out of pocket without their policy.


The Negative Side of Home Warranties

Home warranty policies can be worded in such a way that they leave a gap in your coverage. As mentioned before, in some cases this makes perfect sense. If an appliance is abused, or a home system is never maintained, your policy isn’t responsible for cleaning up after your mistakes as a homeowner (or maybe it was the mistakes of the previous owners). However, there are other cases in which a homeowner may think that they’re covered under their home warranty policy when, in fact, they are not.

The most prominent example of this is a home warranty policy not covering a full replacement of an appliance or system. You may believe that the broken part of your home is faulty (and, in many cases, you may be correct), but that doesn’t mean that your policy covers a brand-new appliance or component. In many cases, you may get stuck with a repair that acts as a “band-aid” but doesn’t fix the true problem. Another case where many home warranty policy holders are surprised that they’re lacking coverage is when certain components of their appliances are systems aren’t covered. For example, you may have a policy that covers your fridge, but the ice maker or freezer portion of the unit isn’t covered by your policy. These situations can be difficult to navigate, and it may feel like you’re being scammed.

Unfortunately, most people prefer not to read the lengthy agreements, especially the fine print. Later, when they end up in a situation that was listed in the terms but was totally unexpected to them, they feel very disappointed. That start thinking that any home warranty is a scam. There is not much they can do about the company contracts, so they go to the forums and start blaming the companies, publishing posts like “American Home Shield Scam – Beware!” or “American Residential Warranty Scam – Stay Away From Them”. We have seen posts like that not only about American Home Shield or Home Warranty of America reviews but also about many other reputable companies that have hundreds of thousands of customers and helped many of them save their money on home repairs. So, whenever you see customer feedback saying something like “American Home Shield scam”, check the company review first. Any well-established and trustworthy company can have unhappy customers. It happens even to the leaders of the industry.

It’s important to remember that if you’re working with a reputable company, their policies are written the way they are for a reason. Make sure to read through your policy very thoroughly so you know exactly what’s covered, what’s not, and can clarify any gray areas.

There are, of course, also home warranty scams to look out for. These companies do more than just fail to communicate your exact coverage or don’t get a contractor to your home in a timely manner. They take your money as monthly payments on your policy with no intention of ever assisting you with any home repairs or appliance replacements you may need or that are “covered” by your so-called policy. Luckily, there are several ways you can spot home warranty scam red flags before you sign. First, vet the company you’re considering working with thoroughly. Are they established? If not, there may be a problem. Second, check your local government’s review of the business to see if they’re fraudulent or if any cases have been made against them. Finally, read their contracts very carefully. It should be clear if they’re cutting corners or if there are countless loopholes.

The worst home warranty companies simply collect the money and shut down

We have covered a significant amount of fly-by-night home warranty companies that have provided poor service during their short existence and upon closing down shop, did not reimburse existing clients who had ongoing contracts. This is one of the worst forms of scams. It may be difficult to prove that this was an intentional scheme, but it definitely appears like it when you look at it holistically in retrospect. These are the companies we have covered and have shut down with no reasonable notice or reimbursement of money as far as we know. 


ReviewHomeWarranties Can Help You

Review Home WarrantiesSeeking home warranty coverage isn’t a bad idea, despite the scam artists out there who give the industry a bad name. The key is protecting yourself against home warranty scams and working with reputable companies to ensure you get the coverage you want and need as a homeowner. can help you through this process with detailed reviews of various home warranty companies based on their reliability and how clear their terms and conditions are. With us, you’ll know which are the worst home warranty companies and which have proven to be worth testing.

Review Home Warranties provides valuable information for homeowners, home buyers, home sellers, and anyone else who may be considering acquiring a home warranty. Their reviews are also honest, and they highlight the best 10 companies and organize their reviews based on company, pan pricing, and what state you live in. Reviews are incredibly detailed. For example, the top home warranty company rated, Choice Home Warranty, looks at the coverage, policies, varieties of plans, total cost, customer reviews, and credibility.

However, Review Home Warranties genuinely wants you to make the best decision for your personal coverage needs. Their reviews also highlight the negatives of each company. For example, American Home Shield’s review highlights both their inexpensive plans, but also their aggressive marketing strategies, low coverage cap, and the fact that claims get denied regularly. They even offer suggestions for other home warranty companies to consider with better coverage or practices.

So, are home warranties a scam? which are the worst home warranty companies everyone fear of? While home warranty scam artists do exist, and they can be difficult to spot, not all home warranty companies are out to trap their customers. ReviewHomeWarranties can help you pick the most reputable home warranty insurance with the best policy options. You can protect yourself by exploring this site, but also by going the extra mile to vet the company you’re thinking of working with, and by carefully reviewing your policy so you understand the full scope of what’s covered and what’s not.


Recommended for you: What does a home warranty really cover: a comprehensive guide.


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