Home warranty scams: how to spot and avoid them
Home repairs can cost thousands of dollars over the years. What happens if your water heater breaks and you’re on a tight budget? What do you do if multiple appliances go down at the same time? Between appliance repairs, home system repairs and regular maintenance, it might seem like the bills never end. This is where a home warranty comes in handy.
By covering many common appliances and systems in your home, a home warranty can help minimize costly home repairs. It also helps keep your home up and running. However, not all home warranties are created equal. Some companies even sell home warranty scams that take advantage of homeowners.
How does a home warranty work?
It’s important to understand how a home warranty works so you can spot an obvious scam. A home warranty is a service contract designed to give homebuyers peace of mind when purchasing a new home. They cover home appliance and system repairs and replacement due to normal wear and tear. So, when your ancient washer finally breaks down, your warranty will get you back up and running.
A home warranty is not part of your homeowners insurance policy. Insurance typically covers repair costs after natural disasters and damage to your home (i.e., if a storm causes a roof leak or a tree breaks your window).
While home warranties can cover a number of major appliances and home systems, terms and conditions may apply. It is normal for a home warranty company to charge service fees or include a deductible in the fine print. Home warranty providers will also list any exclusions, coverage limits and policies on pre-existing conditions in the terms of service.
6 signs of home warranty scams
Don’t let home warranty scammers keep you from getting a quality home warranty. A number of reputable home warranty providers provide quality service. But first, knowing the big red flags to look out for while researching providers is important. Here are six signs of home warranty scams.
Unclear terms and conditions
Understanding your home warranty’s terms and conditions is essential. Not only do they provide the information you need to make a claim, but they also keep the provider true to your contract. Vague policy terms can be difficult to enforce.
A reputable company’s terms are open and honest about what your contract does and doesn’t cover. This includes any major home appliance or home system exclusions, coverage limits, pre-existing conditions, claim timelines and service wait times. Documents must also include information about service and workmanship repair guarantees.
If your service contract is unclear, vague or missing important information, it’s a red flag. Even if a customer service or sales agent can explain parts of the contract to you, make sure they document it in writing. If something isn’t written in the contract, it’s hard to enforce. If the service provider won’t put its policies and terms in writing, it’s likely a scam.
Difficult cancellation and claims process
If you have to jump through hoops to make a claim or speak to a person, it’s a big red flag. A home warranty company should have an easy and clear way for you to make a claim both online and over the phone. You should be able to file a claim any time of day because home malfunctions don’t always happen during business hours.
Once you file your claim, the company should let you know exactly what to expect from the claims process. This includes a time frame for your service repairs, any charges or fees to expect, and the reasons for any claim denials. Warranty companies determine coverage under their contracts and can deny claims. It is important to understand the company’s denial policy, its process, and the steps to take if it denies your claim. A company that frequently denies claims is a red flag.
Similarly, it can be a scam if a warranty company makes it difficult to cancel your home warranty. It’s common for a homeowner to make monthly or yearly payments for their home warranty. This means that some companies may require a 30-day cancellation notice. However, if a company makes it difficult to find its cancellation policy, makes it impossible to reach customer support, or charges outrageous cancellation fees, it’s likely a scam.
No state registration
Another major red flag when avoiding home warranty scammers is to ensure the company you choose can do business in your state. Warranty companies must register with the state, and each state has independent regulations regarding home warranties and service contracts. Regulations include ensuring contracts list what the policy does and doesn’t cover clearly and understandably. This helps ensure that a company honors its contracts and covers claims.
A home warranty company must have authorization from your state’s insurance department to conduct business. Suppose a company is not authorized or is unwilling to show you its authorization. In that case, it's likely a scam (or a very poorly run business).
Even with a home warranty, paying service fees is common. Whether you are paying a one-time service fee or must pay for every repair visit, the contract terms should list all fees and extra charges. It’s suspicious if the fees are not listed or if there are unexpected charges.
It’s important to read customer reviews when researching home warranty companies. Keep an eye out for complaints about extra costs or fees. If there are a lot of complaints about unexpected charges, it’s best to stay away.
One of the most important steps in finding the best home warranty companies is to read customer reviews. Many great and reliable companies have negative reviews online. People are more inclined to write a review for poor service before they write one for good service. So, it’s important to note any patterns. If a company has a lot of complaints about customer service, quality of repairs or claim denials, it’s worth noting.
Don’t limit yourself to the company website or Google reviews when looking for customer reviews. Search consumer review sites like the Better Business Bureau (BBB), Consumer Reports and Angi. The BBB and Angi require companies to register with them to become accredited. The BBB even offers grades based on customer satisfaction, coverage options and more.
You can also reach out to your state’s department of insurance or attorney general’s office. If someone’s filed complaints against a home warranty company, it’s a major red flag.
Another important part of reading home warranty reviews is finding out how the company responds to negative reviews. If a company responds by showing it cares about fixing its mistake, it’s a sign of respect for its customers. If a company responds poorly, it clearly shows it cares more about being correct than helping customers.
Aggressive marketing techniques
When shopping for a home warranty, requesting a quote or speaking with a salesperson before purchasing is common. Most companies will follow up at least once to try to close the sale. However, if a home warranty provider continues to bombard you with phone calls and emails, it could be a sign of a scam.
Constant hounding and aggressive marketing techniques are not only annoying, but they’re a major red flag. Why is the company so determined to get you to sign up? Aggressive sales tactics suggest that the company is more determined to sign up customers than provide quality customer service. It could be a sign that the company is trying to trick you into signing a contract before you can read the fine print.
Another sign of a home warranty scam is constantly receiving calls, emails or letters demanding you auto-renew your home warranty contract. These letters and calls emphasize the time sensitivity of their demands and may even threaten to end your home warranty if not addressed. A reputable home warranty company will never demand a customer immediately wire or transfer money. Never give out your credit card information before checking with your warranty company’s customer service via the number on your contract.
Tips to help you avoid a home warranty scam
Here are a few quick tips to help you avoid a home warranty scam.
- Read the terms and conditions. Ensure the terms and conditions list everything about the home warranty coverage. This includes exclusions, claims processes, service time frame, service fees, claim denials and repair guarantees.
- Review online customer reviews and ratings. Search online customer review sites like the BBB, Angi and Consumer Reports. Take note of common complaints and how the company responds to negative reviews.
- Check for state registration. Make sure the home warranty company can do business in your state. Inquire with the attorney general's office about any complaints filed with the state.
- Ask for recommendations. Ask your real estate agent or lender for home warranty provider recommendations when searching for a new home. You can also ask your friends or new neighbors, especially if you are new to an area.
- Speak with a home warranty representative. Before signing up for a home warranty, make sure you can speak with a human representative. Ask important questions about the contract and double-check the answers against the terms and conditions. Make sure you can call an actual person quickly so you know you won’t be stuck speaking to an automated line when you call to make a claim.
- Do not give anyone your personal information. Do not give any company your credit card or personal information when calling for quotes. This is especially important if a company reaches out to you.
- Get a home inspection. By getting a home inspection before signing up for a home warranty service, you will have a good understanding of the condition of your home systems and major appliances.
- Do your research. Thoroughly research home warranty companies and check how long they’ve been in business. Compare prices and coverage to other home warranty plans. Know as much about the company as possible before signing up.
What to do if you are a victim of a home warranty scam
If you are a victim of a home warranty scam, there are a few steps you can take to report the company. It’s likely the company scammed other people, too. Any data you can supply will help keep others safe.
- Call your state’s department of insurance
- Report the company to the attorney general’s office
- File a report with the Better Business Bureau
- Reach out to all of your state’s consumer protection agencies
Are all home warranties a scam?
Not all home warranty companies are scams. There are a number of reputable home warranty companies that offer great services, reliable technicians and affordable costs. They also have satisfied customers, positive reviews and high business ratings.
The best home warranty companies offer transparency, flexible plans, easy claims processes, excellent customer service and additional perks. Home warranty companies should be trustworthy, come recommended and be in business for years. Cinch Home Services is one of the most reputable home warranty providers to consider.
Are home warranties worth it?
Whether a home warranty is worth it depends on each homeowner’s situation. For many, it’s a no-brainer, thanks to the long-term cost value warranties provide. Homeowners can pay one yearly or monthly payment and have peace of mind knowing their home is covered. This is especially reassuring because homeowners insurance doesn't cover many home systems and appliances.
A home warranty is perfect for:
- Homeowners on a fixed income
- Homes without an emergency repair fund
- Those buying “new to you” homes with aging appliances and older home systems
- Home sellers who can transfer the warranty to new buyers
- Anyone who wants an easy way to get quality home repairs
Have peace of mind with Cinch Home Services
Find peace of mind with a reputable home warranty provider. Cinch Home Services offers great customer service, coverage transparency and an easy claims process that will have your home back up and running fast. What’s more, you can find just the right coverage for you.
Cinch offers three flexible warranties that cover home appliances and built-in systems. Each plan offers reduced repair costs, discounts on brand-name appliances, and extra perks like a credit for HVAC filters.
- Cinch Appliances plan. This plan covers repairs on all major home appliances. This includes washers and dryers, stovetops, built-in microwaves, trash compactors and more.
- Cinch Built-in Systems plan. This plan is just what you need to protect your home from major repair costs related to home systems like HVAC systems, electrical systems, plumbing and more. This warranty includes repairs to garbage disposals, garage door openers, toilets and smoke detectors.
- Cinch Complete Home plan. This plan combines the appliance and built-in systems warranties. It also includes a homeowners insurance deductible reimbursement. In short, this comprehensive plan will help you keep repair costs down across your home.
- Customizable plans. What truly puts Cinch above the rest is the ability to customize your warranty to cover all aspects of your home. This is extremely helpful if you have additional built-in systems, such as a septic system or well. It is also useful if you have a pool or spa. Simply tell Cinch what you need and let it customize a plan for you.
Cinch technicians are equipped to handle all your repair needs. If a part needs ordering, they’ve got you covered. If you own a specific brand, they’ll have experience with it. Each technician is carefully vetted and reliable. Cinch will even set appointments on your behalf.
With a 180-day workmanship guarantee on covered repairs and 40-plus years of experience, Cinch home warranties are the perfect addition to your home. Get a quote today!