How To Spot A Home Warranty Scam
Written By: Amy Galloway
Edited by: Andrew Dunn
Updated May 1st, 2023
Everyone with a cell phone has probably received a scammy text message or voicemail warning about an expired warranty. They’re so common that they’ve become a sort of joke.
But not all home warranty scams are so obvious. When you’re buying a new house, you may get advertisements from all manner of companies wanting to sell you a home warranty to protect your wallet. Many of them are legitimate – but some may be scams. That’s why it’s so important to research carefully before buying a home warranty plan.
In this article, we’ll give you tips to help you spot a home warranty scam. We’ll also go over the hallmarks of an excellent home warranty company to help you choose the right one – because even reputable home warranty companies can leave out some key pieces of information that may have you wondering whether you are getting what you paid for.
What is a home warranty?
A home warranty is a protection plan for your home’s appliances and systems, like your plumbing, electrical and HVAC. If one of them suddenly breaks down, your home warranty should step in to cover the cost of repairing or replacing it.
Home warranties are different from a homeowner’s insurance policy. Your insurance typically only applies if your home is damaged in a rare disaster like a hurricane or fire. Home warranties, on the other hand, are used when something happens to your home due to normal wear and tear.
Are home warranties legitimate?
Yes, home warranties are legitimate – as long as you purchase from a reputable company. They can be a great way to give you peace of mind, knowing that you won’t be stuck with an astronomical home repair bill you weren’t planning for. Home warranties can also help you find the right technician to keep your home in good working order.
In short, home warranties work, and millions of homeowners have them.
Signs of a Home Warranty Scam
While home warranties are legitimate, not all companies that claim to sell them are. Before you sign up for a home warranty plan, keep an eye out for red flags. This is especially true if the company approached you, rather than the other way around. Aggressive marketing, poor customer service and confusing contracts can be signs of a home warranty scam.
Aggressive and Misleading Marketing
One of the most common signs of a home warranty scam is an unexpected letter telling you your home warranty is about to expire. These calls, texts, or letters often have you wondering what is getting canceled and how it will impact you – and they may come from scammers.
Sometimes when reading the fine print, you will see that you never had a policy, to begin with. These companies simply hope you won’t pay much attention and just sign up and pay without asking questions.
Unfortunately, this practice is not used exclusively by the worst home warranty companies, as there are constant complaints about the largest home warranty companies in the industry who are overly aggressive in their techniques as well.
Unclear contracts
Your home warranty contract should list exactly what is covered, including a list of appliances and systems and the coverage limits for each. As a homeowner, you should be able to clearly see the home warranty’s service call fees, how to cancel your plan, how to file a claim, and how you’ll be covered before you sign a contract. It should not take a doctorate degree to decipher what a home warranty service contract says.
Difficulty reaching customer service
Customer service should be readily available to discuss home warranty plans and help when an issue arises with your air conditioning or water heater. Not being able to get in touch with the customer support department is a cause for concern.
Unusual payment terms
When you start looking at a home warranty policy for your new home, make sure you have a general idea of how much a home warranty costs. If all the quotes you are getting for home warranty plans are in the $30 to $50 a month range, and a company offers you no payment for six months, that could be a concern. What will the price become after that period? How much coverage are you getting?
Complicated cancellation procedures
Canceling a home warranty should take you no more than a few minutes. Some companies require an email to be sent with your request; others want a phone call. However, when large fees are attached to cancellation or the cancellation process requires multiple calls to numbers that nobody answers, that could be a sign of a scam.
Delayed payments
When you file a claim to have your HVAC or washing machine repaired, it should be handled quickly. When payments are pushed out for weeks on end, it is unfair to you as the customer. A legitimate company will have a firm policy for how quickly claims are handled and when payments are sent out.
Negative reviews and customer complaints
While every company will have a negative review or two, a pattern of complaints could be a sign something is amiss. In addition to looking for negative reviews from popular consumer review sites, it makes sense to check with the Better Business Bureau and your state attorney general’s office. Make sure there are no active investigations or lawsuits with the home warranty provider you’re considering. If there are any, dig deeper before signing a contract.
What to do if you suspect you are dealing with a home warranty scam
It’s terrible to feel like you are dealing with a home warranty scam. The good news is that there are steps you can take to make sure that your home repairs are completed, and you are not incorrectly charged for your home warranty.
- Check your contract first. Sometimes customers feel scammed by a company when they have a claim denied. But not all claim denials are improper. Things like pre-existing conditions could be a legitimate reason to deny your claim. Check the contract first to ensure your frustration is warranted.
- Try to resolve your issue with the company. Handling a bad home warranty situation is considerably quicker and more manageable if you can work it out with the company directly. If you aren’t getting the necessary answers, try talking to a supervisor.
- Check the company’s listing with the Better Business Bureau. The BBB can give you insight into whether the situation you’re facing is a recurring issue with this particular provider.
- Contact your state’s insurance department or attorney general’s office. Consumers are often protected through their local attorney general’s office. When you contact your state’s attorney general, their office can look up the home warranty company and see what other complaints are filed.
- Report the company to the Federal Trade Commission. If all else fails, you have the option to report the company to the FTC. If you reach this step, ensure you have recorded your other steps and have information to back up your report.
How to find a reputable home warranty company
The best way to avoid a home warranty problem is to do your homework before you sign up for a plan. These steps can help you find a great home warranty company.
Step 1: Decide the coverage you need
There are many different kinds of home warranty plans. Some cover only your home’s appliances. Others cover only your home systems. Comprehensive plans cover both. Before you shop around, decide what’s most important to you. For example, if you recently bought your home’s appliances and feel good about the manufacturers’ warranties, you may only need a home warranty that covers systems. If you’re a first-time homeowner unsure of what to do when something goes wrong with your home, a comprehensive plan may be best for you.
Step 2: Make a list of potential home warranty companies
Do your friends or neighbors have a company they recommend? Did you read one of our reviews that seemed to stand out? Make a list of the home warranty companies that have the most benefit to you.
Step 3: Read reviews of the companies.
Find unbiased reviews of the home warranty companies you’re considering. ReviewHomeWarranties has investigated almost every major home warranty company in depth, and can give you unbiased and useful information. Be aware of reviews featured on a provider’s website; those are often filtered.
Step 4: Compare plans and policies
Even home warranties that cover the same items may be significantly different. Take a look at the service fees each home warranty company charges to send a technician to your home. Also carefully review the coverage caps for different types of appliances and systems. One warranty may pay only $1,500 toward an HVAC repair, while another company may have no limit at all. Some companies may have more exclusions – things they don’t cover – than others. Comparing plans and policies from one provider to another is best to ensure you understand the home warranty coverage.
Step 5: Get quotes from each company
Once you narrow down your list, get quotes to see how the pricing compares from one company to another. In nearly every case, you can get a free quote from a home warranty company directly on its website. Make sure that you are comparing similar types of plans.
Step 6: Call the company and ask questions
It’s normal to have questions about the policy. We find that calling to clear up a few questions is actually a great way to see what customer service will be like. If you are greeted by a friendly and helpful customer service representative, you are on the right path to finding a great provider.
Step 7: Choose the best company and lock in a policy
The last step is straightforward: Pick the top performer and sign up for a policy. Most home warranty policies have a waiting period of around 30 days, so starting the policy as soon as you are confident in a provider makes sense.
What to look for in a good home warranty company
Here are some basic things to look for in the best home warranty companies on the market.
- Transparent contracts. It should take only a few minutes to understand the main points of a home warranty contract. If you are frustrated or confused by what you are reading, stay away. Great home warranty providers offer you a sample contract on their website.
- Limited exclusions. All home warranty contracts have exclusions – things that are not covered. The best home warranties have few of these, and the ones they do have are well-explained.
- Solid work guarantee. With a work guarantee, your home warranty will send a technician back out to fix a problem that returns within a certain period of time – free of charge. The longer the workmanship guarantee, the more confidence the home warranty company has in their contractors and the more protection you have. If a repair doesn’t work the first time, the work guarantee ensures you won’t have to pay double for the repair.
- Good customer service. Calling a company before you sign up for their home warranty plan will help you get a better feel for their customer support procedures.
- Easy and quick claims process. A great home warranty company lets you know the exact steps to follow to file a claim and what it will take to get your money for the repair. The claims process should have an estimated time period to ensure you are not waiting weeks for a repair or replacement.
- Positive customer reviews. It’s normal to see a few negative customer reviews, as people are more likely to post a review when they’re annoyed. However, if a company has a bunch of positive reviews, it may be one worth considering.
- Clear cancellation policy. Most home warranty companies have a cancellation fee if you end your plan before the end of the term. Cancellation fees will vary from one provider to the next; make sure you clearly understand what yours is.
We Can Help You
Seeking 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. ReviewHomeWarranties.com 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 home warranty companies are the worst and which have proven to be worth using.
ReviewHomeWarranties.com 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 ten 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, Select Home Warranty, looks at the coverage, policies, variety of plans, total cost, customer reviews, and credibility.
However, ReviewHomeWarranties.com 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 all home warranties a scam? Which are the worst home warranty companies to avoid?
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.com 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.
Not interested in understanding the ins and outs of home warranties? Want a home warranty today by a credible company?