Educational Consumer Tips


Author: Better Business Bureau

For years, home warranties have been popular among homeowners as a way to avoid unforeseen expenses related to faulty home system components and appliances. Home warranties are also equally popular among home sellers who want to give buyers peace of mind and expedite the sales process.

There are over 30 residential service companies licensed by the Texas Real Estate Commission (TREC) to sell residential service contracts in the state. Home warranty contract prices typically range anywhere from $250 to $500 a year. Homeowners are normally required to pay $30 to $100 for each service call -- a fraction of the market rate for service and parts. By all accounts, it looks like a win-win situation for the consumer.

However, some consumers are beginning to ask, “Is it really worth the cost?” The answer isn’t always clear.

At the BBB of Greater Houston and South Texas, we see a lot of complaints from consumers who allege their home warranty provider refused to fix or replace defective equipment. In response to complaints, companies often state claims were denied due to a lack of maintenance on the homeowner’s part.  

Understand there are a number of limitations and exclusions which apply to home warranties. Complaints usually arise when a claim is diagnosed as a “pre-existing” condition or the homeowner failed to maintain or service their unit. Determining whether the warranty company is or is not responsible for repairs can be difficult. 

The truth is some home warranty providers have a better track record of covering claims than others. While some providers rely on exclusions hidden in the small print to avoid paying claims, there are many reliable companies out there which do not follow such practices.  

Home warranty policies can be beneficial if you have a clear understanding of what is and is not covered by the policy. It is also important to choose your provider carefully. The best way to find the best provider is to do some research beforehand.

The BBB of Greater Houston and South Texas offers these tips:

  • Research prospective providers before you purchase. Check with the BBB for a free review of the company’s business and complaint record.
  • Verify licensing. Contact TREC to ensure the company you plan on purchasing a policy from is licensed with the Commission.
  • Read the contract thoroughly. While it is easy to gloss over the fine print and dismiss it as indecipherable nonsense, remember, it is difficult if not impossible to argue the contract is unfair or unenforceable after you’ve signed it. Ask plenty of questions about what is and is not covered and make sure any verbal promises made are reflected in the contract.
  • Consider the deductible. The industry average is $50 to $100 per claim. But some companies charge as much as $150 per call.
  • Ask the company who will perform the repairs. Most warranty companies have their own network of service contractors. If this is the case, make sure you research contractors as well. However, some do allow you to hire a contractor of your choice. Be sure you understand the company policy before you buy the service.