Worst home warranty companies and scams

How to identify a bad home warranty company

A good home warranty company will cover the cost of repairing or even replacing home systems or appliances if they break down from wear and tear. This is different from homeowners insurance, which usually covers items damaged by fire, theft or other unforeseen events. However, with so many home warranty companies out there, it can be hard to separate the good ones from the bad.

Research is key to finding a good home warranty company.

There are some things you can do 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.

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

» RELATED: How to avoid car warranty scams

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.

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. “Finally, understand the cancellation policy before signing anything and trust your instincts — 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.

What to do if you fall victim to a home warranty scam

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 to look for when researching 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. For example, 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, according to Kathleen Kuhn, the head of business development for Fixle, an appliance management company.

Before signing up, check the company’s licensing and accreditation. A legitimate company should be able to provide proof, but you can also check with the Better Business Bureau to see if a company is licensed and accredited.

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.