Home Warranty Regulation: Understanding the Laws

Home warranties are popular among homeowners who want to ensure that their appliances and systems are covered in the event of a breakdown. There are a number of home warranty providers to choose from, however, and some companies have better reputations than others.

To find a worthwhile plan from a reputable company, homeowners should be somewhat versed in the regulations that govern home warranty companies. In this article, we'll review how home warranty companies are regulated and identify the governing bodies responsible for it. We'll look at a few of the laws and regulations that are in place to protect consumers. Finally, we'll discuss what to look for when choosing a home warranty company.

Are Home Warranty Companies Regulated?

Yes, home warranty companies are subject to government regulation, but policies differ by location. In the United States, each state has its own set of regulations. Home warranty companies must be licensed in every state in which they operate and must comply with state-level regulations to continue providing services to state residents. These home warranty regulations are designed to protect consumers from unfair or deceptive practices. Similar regulations govern banks, insurance companies, and other institutions and industries.

You may have noticed that it’s somewhat uncommon for a home warranty company to operate everywhere in the United States. This is usually because of the legal and logistical hurdles of obtaining 50 separate licenses.

There are also federal regulations that home warranty companies must comply with. Any reputable home warranty provider will be in full compliance with national and state-level requirements alike.

Who Regulates Home Warranty Companies at the State Level?

At the state level, different regulatory bodies may oversee home warranty companies. Home warranties can be under the purview of a real estate commission in one state but insurance department in another. In New York State, the Department of Financial Services calls the shots. In Minnesota, it’s the Minnesota Department of Commerce. You can look online or contact state authorities for information specific to your state.

Who Governs Home Warranty Companies Nationally?

Home warranty companies must comply with Federal Trade Commission (FTC) regulations, just like most major businesses. The FTC demands fair and accurate advertising and open disclosure of information to consumers. More specifically, the FTC requires that home warranty companies clearly disclose all costs, fees, and coverage limits to consumers before they purchase home warranty coverage. Per FTC regulations, home warranty companies must also provide consumers with an accurate description of the services they offer, as well as a 30-day right-to-cancel guarantee.

The U.S. Department of Housing and Urban Development (HUD) also enforces the Real Estate Settlement Procedures Act (RESPA),which requires home warranty companies to provide consumers with a clear and concise disclosure form that outlines the terms of the home warranty. This disclosure must include all costs, fees, and coverage limits.

Nonregulatory Agencies

It is also worth mentioning consumer advocacy organizations that play a key role in helping to keep home warranty companies and other businesses honest. Institutions such as the Better Business Bureau don’t have regulatory power per se, but such organizations provide a forum for consumers to voice their concerns and provide feedback on their experiences with various home warranty services. Consumer advocates can also provide homeowners with guidance and advice on how to avoid scams and how to best protect their rights when dealing with home warranty companies.

How to Shop for a Home Warranty

1. Make sure the company is licensed, bonded, and insured.

Before you agree to any home warranty contract, make absolutely sure that the provider is licensed to operate in your state. Check with your state officials to first determine which department or governing body manages home warranty companies. Then contact the relevant regulatory agency to ensure that everything is aboveboard.

2. Research the company thoroughly and read customer reviews online.

Unfortunately, valid licensing isn’t everything. There are plenty of licensed and insured businesses that still engage in predatory practices. Take the time to research your potential home warranty company before you purchase a plan.

Be careful to avoid affiliate marketing sites. These are effectively deceptive advertisements. Companies can pay online sites to rank them more highly in lists or reviews. Fortunately, this information must be disclosed in the fine print on the website.

Good resources include the Better Business Bureau, Google, and U.S. News. Read through as many legitimate reviews as possible to look for patterns that can indicate dishonest practices on behalf of the company.

3. Ask for references and follow up with them to make sure they are satisfied with the service.

Any legitimate company will be able to provide authentic references from past or current customers. Don’t be afraid to ask for references, and be wary of companies that refuse to issue them.

4. Read the fine print of the contract and make sure you understand the terms and conditions.

Make sure you understand the ins and outs of a home warranty contract before you sign it. Look for clauses that might unreasonably deny service, and keep an eye out for hidden fees. One home warranty company might quote you lower premiums and service fees, for example, but will not be so forthcoming about low coverage limits. This could mean that the plan pays out only a small portion of the cost to repair or replace a covered appliance in your home.

5. Determine how long service typically takes once you file a claim.

You don’t want to be waiting for weeks on end to have your refrigerator repaired. Ask your potential warranty provider about the time it typically takes to resolve a claim. Worthwhile companies respond in days, not weeks.

6. Know the extent of your current coverage.

No one wants redundant coverage. It’s possible that some of your appliances or home systems are already under warranty. Perhaps your washing machine is still reasonably new, and the manufacturer’s limited warranty is still active. Or maybe your plumbing and electrical systems are still protected by a builder’s guarantee.

Assess the coverage you might already have, then work with your warranty provider to subtract covered equipment and units from your plan until your existing coverage expires.

How Liberty Home Guard Can Help

U.S. News named Liberty Home Guard the top home warranty company in America for two years running. We’ve achieved that honor by being open and transparent with American homeowners and offering policies and services that reliably supply savings, convenience, and peace of mind.

No matter your lifestyle or home needs, we have a plan for you. Consider our Appliance Guard plan to protect your kitchen and laundry appliances, or the Systems Guard plan to shield your plumbing, electrical, and HVAC systems. Maybe you want the more comprehensive coverage of our Total Home Guard package, or just a few of the granular services under our umbrella of optional add-ons.

Get started by using our website for a free quote. You can also call (866)-432-1283 to talk through your options with someone from the Liberty Home Guard team.