Is The Home Warranty Regulation Too Loose And Ineffective?


The home warranty industry has been both helpful and harmful. What started as a thriving market of honest contractors has been somewhat spoiled by home warranty scams. As a result, the entire industry’s reputation is now mixed at best. The home warranty market is trying to become more honest and accountable, but it is frequently let down by unscrupulous warranty providers. Many of them turned out to be fly-by-night companies that open, rake in as many paid contracts as possible, and then close down unexpectedly, leaving customers without their money and without protection for their home. Three recent examples of these scams were Secure Home Warranty, American Home Guard and Endurance Home Warranty.

Often, clients have various problems with home warranty companies. One example of these scam companies was Choice Home Warranty. According to theindychannel, the company’s clients thought their warranty would take care of their home, but when systems or appliances broke down, the company would refuse to do repairs – even if the claim was legitimate. For instance, one family called about their broken air conditioner but were told that no repairs would be performed because the air conditioner was “too old” even though this wasn’t what the contract said. Another example involved a client from Kansas who had a broken dryer. The company agreed to pay $300 toward a new dryer but never sent any money.

In such situations, the client feels like they are owed financial reparations, but the company often protects itself using the fine print in the terms and conditions. The fine print often includes many exclusions and limitations in the coverage policy. For example, plumbing stoppages are sometimes a different coverage item than the plumbing system. If you have a stoppage that breaks the entire system, but only stoppages are covered, the warranty may fix the stoppage but not cover the cost of fixing all the problems caused by the stoppage. Using these tactics, the home warranty company can get out of having to pay for the repairs, leaving you with a broken plumbing system and no way to pay for it. One more example is when a broken appliance has an old part inside that you didn’t know about. According to the fine print, you should have replaced it – but you didn’t know that. So, because you didn’t properly “maintain” the appliance, they deny your repair claim.

Home Warranty Regulation

Home warranties are not a strictly regulated area. Different states have different laws about home warranties, as well as different authorities controlling them. In the United States, both federal and state laws apply to home warranty regulations. At times, both laws will say the same thing, but sometimes the level of regulation might be different. As a rule, the federal government sets the standard and states then decide how to enforce within their jurisdiction. Consequently, due to the lack of any federal law specifically related to home warranty service agreements, home warranty laws can be quite lax and hard to enforce. Not all US home warranty providers comply with the same laws, especially if the home warranty provider operates across several different states.

In different states, home warranty regulations are put under different sections of the law. In Florida, the government department handling home warranties is the Florida Office of Insurance Regulation, whereas in Texas it’s done under the Texas Real Estate Commission. In New York, home insurance law is grouped under the Department of Financial Services. In Georgia, you can find these laws relating to “home service contract,” while a home warranty in Minnesota is regulated by the Minnesota Department of Commerce.

There remains a lot of confusion and uncertainty about home warranty regulations, and many companies are taking advantage of that confusion. There is no clearly defined legal framework that all states must follow. While some states have stricter control of home warranty policies and there are precedents for lawsuits in those states, other states do not. As a result, dishonest home warranty companies feel like they can get away with unethical practices.

Hometownstation reports that there is a lawsuit aimed at Secure Home Warranty, in which they went out of business in 2017. A key problem in the home warranty industry is that it’s a relatively young industry. Since it hasn’t been established for very long, regulations are lacking and vary widely in different states.

Attorney Josh Shapiro claimed, “These scammers left consumers out to dry by refusing to provide the services they promised, namely, 24/7 access to a claim center that would assist in the repair or replacement of systems and appliances”.

Due to the state-specific regulation, companies prey on the states that have loose regulations. In this instance, Choice Home Warranty is unavailable in California, and so this may be a conscious legal choice to avoid states with stricter regulation, not a business decision.


Home warranty regulations in the USA vary state by state and are overseen by different sectors. In some states, there’s no regulation or oversight. Unfortunately, there is no single law that protects all home warranty customers in America. Reading the fine print is key in knowing the terms and limitations of your home warranty provider. Additionally, it is imperative to research your states’ laws on home warranties so that you know you’re protected by the law when signing a home warranty contract.