When it comes to home warranties, who regulates these companies? This is an important question that all homeowners should be asking. Home warranties are a vital part of protecting your home and its contents, but not all homeowners are aware of what they are or what they cover.
In this article, we will discuss who regulates home warranty companies and what this means for you as a homeowner. We will also compare home warranty regulation to insurance company regulation and help you understand the basics of how both of these systems work.
What Is a Home Warranty?
A home warranty is a service contract that protects homeowners against the costs of repairs or replacements for major systems and appliances in their homes. Most home warranties cover items such as air conditioning units, electrical systems, plumbing, and major appliances like refrigerators and dishwashers.
Home warranties are different from home insurance, which covers damages to your home caused by events like weather damage or theft. Homeowners’ insurance does not cover the cost of repairs or replacements for items like appliances or air conditioning units.
Manufacturer’s warranties typically only cover defects in materials or quality and have a limited time frame, usually one or two years. On the other hand, home warranties cover items for a set period of time, usually one year, and include normal wear and tear.
What Types of Services Do Home Warranty Companies Offer?
Home warranty companies offer a variety of services to their customers. These services can include:
- Scheduling repair or replacement appointments
- Coordinating with service providers
- Providing access to a network of qualified service providers
- Covering the cost of parts and labor for repairs or replacements
- 24/7 customer support
Now that we’ve answered the question, “what is a home warranty,” let’s discuss who regulates these companies.
Home Warranty Regulation 101
Home warranties first came about in the US during the 1970s real estate market boom, when people wanted to safeguard their expensive home appliance buys. American Home Shield became the first provider of home warranty services, starting an industry as we know it today. The next big challenge that presented itself was developing a way to monitor these types of service companies.
Home warranties are regulated at a federal and state level, with the latter often working within the guidelines set by the former. Because there’s no one-size-fits-all home warranty contract, they really vary from place to place. If a service company believes an appliance wasn’t taken care of correctly, it may not be included in the coverage. To know what you’re getting into, it’s important to read all the details carefully.
Although home warranties and insurance policies both require the customer to pay a monthly premium, there is one key difference: home warranty providers are not regulated by federal law.
Although insurance companies are vetted by multiple authoritative bodies, the same cannot be said for home warranty providers. Home warranties aren’t regulated to the same degree, making some risks associated with them higher than those of dealing with an insurance company.
Who Regulates Home Warranty Companies?
In the US, home warranty companies are regulated by two different types of bodies: Federal and State organizations. The Federal Government creates a standard operating protocol that all states must follow. However, States have more leeway in how they regulate companies within their borders as long as those regulations do not break any laws set out by the Federal government.
As you may know, not all warranty companies adhere to the same rules and regulations – these can differ significantly from state to state.
Here are some of the organizations that regulate home warranty companies in these states:
- Florida: Florida Office of Insurance Regulations
- Minnesota: Minnesota Department of Commerce
- New York: Department of Financial Services
- Texas: Texas Real Estate Commission
The National Home Service Contract Association (NHSCA) is an organization that provides a code of conduct for home warranty companies to follow. The NHSCA is a non-profit organization registered with the Better Business Bureau, which makes it easier for customers to resolve complaints they may have.
How to Choose a Home Warranty: Matters You Should Consider
If you’re a customer or home warranty plan owner, there are some critical aspects of regulation you should know. Here’s a list:
Know the Exact Price of Your Warranty Package Beforehand
A service fee usually costs between $50-$125, and this amount changes depending on the company’s policy. Home warranty premiums are typically annually or monthly and vary from $300-$600.
Home warranty premiums and service fee call costs differ from one state to another because of the disparity in regulations set forth by each state’s governing body. If you have a home warranty or are thinking about purchasing one, it is important that you understand how much the policy will cost. This way, there can be no misunderstandings between customers and the home warranty provider.
Pay Attention To Your Policy Limitations
You, as the customer, should be aware that home warranty companies have coverage limits. They will not cover all your devices but only those specified in your policy.
In addition, please review the limits of coverage a company provides to repair or replace your appliances. If the repair/replacement cost exceeds what is detailed in your contract, you may be required to pay additional fees out-of-pocket. It’s also possible that some home warranty companies do not have large contractor networks and lack access to experienced technicians.
Always go for a company with experienced technicians and large contractor networks. These are key players when it comes to repairing or replacing your devices. Also, take the time to read the fine print of your home warranty contract so that you know all the important details about your coverage.
How Long Does It Take For Your Devices To Get Fixed
The average time it takes for a home warranty provider to fix devices varies depending on the state due to diverse geography and climate. If this duration is not mentioned in your contract, you can ask the company’s customer care team. This way, you will know when your critical devices will get repaired and have peace of mind.
When it comes to home warranty regulation, there are Federal and State organizations that oversee these companies. Homeowners should be aware of the price they will be paying for their warranty coverage as well as the limitations of their policy. In addition, it is important to know how long it will take for your devices to get repaired.
As a final note, make sure you read the fine print of your home warranty contract so that you are fully aware of the terms and conditions. This will help avoid misunderstandings between you and the home warranty company. For more information on a secure home warranty policy, feel free to contact us directly!