Worst Home Warranty Companies and Scams

5 home warranty scam patterns

Across hundreds of recent home warranty company complaints, the same tricks appeared again and again. These are the scams that frustrated customers keep telling us about.

1. The problem with preexisting conditions

How it works: A home warranty company sends its own contractor first. That contractor creates documentation of “rust,” “corrosion” or “improper installation.” This is used to deny a claim retroactively. In this scenario, the inspection itself becomes evidence against you.

Real customer experiences

• “When my air conditioner broke in the middle of summer, I filed a claim right away. It took them over a week just to send a technician, who was clearly overbooked and rushed. After the inspection, they denied the claim, saying it was a ‘pre-existing condition,’ even though it had been working fine until it suddenly stopped.” — Robin in Georgia
• “How they can never even come out and examine a place before issuing a warranty, then deny a claim because of an 'existing condition' or 'poor maintenance' when they have no way of knowing if either is true. I'm done with their scam and feel they should be investigated for fraud.” — Larry in Texas

2. The wrong diagnosis loop

Some customers report contractors who seem either incompetent or intentionally aligned with the warranty company to manufacture denial reasons. It often goes something like this:

• First contractor gives obviously wrong diagnosis
• Company uses that to deny claim or delay
• If you get a second opinion, it claims “unauthorized work”

Real customer experience

Mustapha in Washington wrote in a review: “My furnace has been broken for over three months, leaving my three kids and I freezing cold in our own home. Fidelity sent a contractor who wrongly diagnosed the issue, claiming my air ducts needed cleaning. I told them repeatedly the furnace itself was the problem, but they insisted they only trust their ‘licensed contractor.’ Out of desperation, I paid $1,000 to clean the ducts, even though I knew it was unnecessary — and sure enough, the furnace still didn’t work. After more calls and wasted time, Fidelity told me to hire my own contractor and they’d reimburse me.

“I hired a professional who finally fixed my furnace after months of back-and-forth. The total repair cost me over $1,100, but Fidelity is now refusing to cover anything except a small diagnostic fee. This company wasted my money, time, and left my family suffering in the cold.”

3. The 120-day coverage mirage

Sales representatives emphasize the 30-day waiting period but conveniently bury a big limitation: for the first four months (90 days), you’re essentially paying for coverage you can’t really use.

• First 30 days: No coverage at all
• Days 31 to 120: Only $300 maximum payout (not clearly disclosed)
• The impact: You pay four months of premiums with no real protection

Real customer experience

Rachel in Florida wrote in a review: “I bought the policy in September (19). I was told you cannot use for 30 days 10/19. I made a claim 12/24 GUESS what? They are only responsible FOR UP TO $300, for the first 90 days....wait, it was after 90 days you think.. NOPE, technically has to be 120 DAYS. So the 1st 4 months, REALLY ISN'T COVERED. Review page 24/30 on the contract. So you buy the contract, have to wait 30 days, and then wait an additional 90 days. (You) might as well save your 4 months of payments and just pay for your own repair. Disgusting scam and actually called me at first and said it's not covered, the compressor of my refrigerator. I was like, I read you do cover compressors. Then they backpedaled and said, not going to pay more than $300 for anything because it's in the 120 day period.”

4. The parts vs. labor split

Home warranty contracts often cover “parts” but not installation or labor fees. That means your “$1000 coverage” can quickly become a mere $200 of actual reimbursement. For example, your water heater is covered, but not the cost of:

• Bringing it up to code ($400)
• Installation fees ($200)
• Required new pipes and connections ($300)

Real customer experiences

• “When I submitted the invoice Home Warranty Inc refused to pay for the labor and 3 hour service call because ‘no parts were replaced.’” — Bradley in Minnesota
• “I’ve always been told by the home warranty that they would cover any problems I ever had even if it meant replacing it and all I would have to do is pay the $100 out-of-pocket fee. Turns out they don’t cover everything like I was told. Any kind of installation fees you’ll have to pay. It’s costing me $950 out of pocket to have parts installed.” — Ray in California

5. The multi-claim trap

An AC leak damages your ceiling. That seems like one problem, right? Wrong, according to some home warranty companies.

It might seem logical at first that you have to file separate claims for related issues. But some ConsumerAffairs reviewers suspect this is a sneaky revenue mechanism for home warranty companies.

For instance, an air conditioning leak damages your ceiling. That’s two $75 to $100 deductibles, one for your AC and one for your ceiling. Then the company says that the secondary problem won’t be covered.

Real customer experience

Kelly in California wrote in a review: “The first vendor immediately said the unit needed to be replaced. HGHW stalled for a week, then sent another vendor, who also said it needed replacement but tried patchwork fixes instead. That led to five separate visits, more damage than before (including water pouring from the ceiling), and still no working AC. To make matters worse, HGHW charged us a second deductible because they claimed the new damage caused by their vendor was a ‘separate issue.’”

How to identify a bad home warranty company

Some scammers pretend to be legit home warranty companies but don’t actually provide anything at all. But there are ways to ensure you don’t get stuck with a bad home warranty company.

“Check their online reviews and ratings on sites like the Better Business Bureau,” said Josh Amishav, a cybersecurity expert and the CEO of Breachsense.

“Always compare multiple quotes, and make sure you understand the various coverage options, prices and contract terms,” he added.

Signs of home warranty scams

Many home warranty scams start with a letter or email. In the notice, the scam company says that your home warranty is about to expire and you need to take action. These notices are sent out to people who own a home, whether or not they’ve ever had a home warranty plan. One common home warranty misconception is that you’re required to have one.

Look out for these patterns of complaints in reviews:

• Denying legitimate claims
• Difficulty reaching customer service
• Hidden fees or unexpected charges
• Misleading sales tactics
• Delays in service
• Repairs taking too long
• Unprofessional technicians or poor workmanship

Common home warranty red flags

Overall, home warranty scammers have a few things in common.

• Upfront fees without service: Most companies should offer some flexibility with paying monthly or annually, and they should only charge a service fee when you file a claim. Be on the lookout for customers complaining about paying completely upfront and never hearing back from the company once it came time for a repair.
• Misleading coverage promises: Although contracts can be lengthy, it’s important to read them fully. Scam companies often use vague language to describe coverage or intentionally confusing wording to get out of paying for repairs. A poor provider will bury information about extra charges and lots of coverage exceptions within the contract.
• Unprofessional technicians: Check that a company only hires certified, licensed contractors. You may notice customer complaints about repairs not being done properly or at all. A qualified company should put you in touch with a technician within one to two days, and repairs shouldn’t take weeks unless you need a specialty part.
• Difficult claims process: A good company will allow you to file a claim easily online or by phone. You should never feel like you’re jumping through hoops to talk to someone or get an appointment scheduled with a contractor.
• High-pressure sales tactics: You should never feel pressured to sign up for a plan. Aggressive tactics include constant phone calls, renewal letters and emails saying you have to pay immediately or you’ll lose special pricing or coverage.

How to protect yourself from home warranty scams

To protect yourself from scam home warranty companies, keep a few things in mind:

• If you receive a notice that your home warranty is expiring, don’t reply.
• If you don’t have a home warranty but you’re looking for one, be sure to thoroughly research companies before signing up.

“Be wary of high-pressure sales tactics, unusually low prices and promises that seem too good to be true,” Amishav said. He also emphasized understanding the cancellation policy before signing anything. Put simply: Trust your instincts, and if something feels off, continue your search.

One unhappy customer, Dan in Texas, told us he was one of many “fooled into purchasing the three-year plan because the rates were so competitive.” Dan found that, despite the contract stating coverage for various items, the company consistently denied claims. The company often cited exclusions in the fine print, and he had to argue with customer service to get claims just partially covered.

How to file complaints or take legal action

Start by contacting your bank or credit card company to dispute any charges. Then, report it to the Federal Trade Commission (FTC), your state attorney general and the Better Business Bureau (BBB). Consider consulting a consumer protection attorney if you lost a significant amount of money and need legal assistance.

» KEEP UP: Latest scam alerts

What should I look for in a home warranty company?

Good home warranty companies offer you a reasonable fee to cover your home services and appliances. Most system plans include your HVAC, electrical and plumbing, while appliance coverage focuses on your refrigerator, built-in microwave, stove, oven, washer and dryer. Some plans offer combined coverage for systems and appliances.

The average home warranty plan costs $450 to $600 per year.

As you compare home warranty costs, don’t forget to look over the terms and conditions for coverage limitations like caps on appliance replacement. If the cost to replace your refrigerator with a similar model is $10,000, but your home warranty replacement limit is $3,000, it may not be worth it.

What a legitimate home warranty offer includes

A legitimate company will have clear terms and conditions outlining what is covered and what isn't, along with a list of covered appliances and systems. It will also be upfront with information about claim procedures, service fees and deductibles.

On the website, there should be a clear way to contact the company for information or customer support. You should be able to find details about cancellation and refund policies easily, too.

» MORE: How to get the most from your home warranty

Compare our top home warranty company picks

Read our guide to the best home warranty companies for more on how to choose a reputable warranty provider that meets your needs.

Bottom line

Home warranties cover the costs of repairs or replacements if things go south. Not all companies are good, though, and there are scammers out there. Look for red flags like reports of poor customer service, denied claims, hidden fees and bad repairs. A solid company will have fair prices, clear terms and reliable customer service.

To choose the right company, check online reviews and ratings and always compare quotes. Read the contract, ask questions and watch out for those common warning signs. Be wary of high-pressure sales, low prices that seem too good or promises that seem questionable.

If you've encountered a bad home warranty company or scam, don't be shy about sharing your experiences. Your stories can help others avoid the bad apples. Spread the word, write a review, and let people know what to look out for.