Home Protection Contracts
Many consumers try to protect themselves from costly repairs of their home’s appliances or systems (such as electrical, plumbing, and HVAC) by purchasing a home warranty. Home warranties also are called “home protection contracts” in the California laws that regulate home warranty companies. We hope the following information will help you understand home warranties so that you can make the best decision for your situation. If you do not find the information you need or have a complaint about a claim under a current home warranty, we invite you to call our Consumer Hotline for assistance.
What Is a Home Warranty?
A home warranty is a contract between a home protection company (a.k.a. “home warranty company”) and a homeowner in which the warranty company promises to repair or replace parts of a home system or certain appliances, such as washers, dryers, ovens, and refrigerators. Home warranties cover wear and tear, deterioration, or defects that existed when you bought or leased your home. In some cases, or for additional fees, the warranty might also cover air conditioning units, garbage disposals, doorbells, ceiling fans, garage-door openers, water softeners, trash compactors, built-in microwaves, and many other appliances.
Home warranties are not the same as a homeowners’ insurance policy. A homeowners’ policy covers damage to your personal property and dwelling caused by major events, including natural disasters like wildfires. Home warranties do not overlap or replace a homeowners’ insurance policy.
Home warranty forms are not standardized. However, the law requires them to clearly disclose and explain several important provisions. Some of these are listed below. The specific appliances, systems, and components a warranty covers will be stated in the contract.
Home warranties are sometimes included when you buy a house, and are often paid for by the seller or agent. Others are sold on-line or by TV or other advertisements. It is important to know that you can choose your warranty company. You should investigate the warranty company and the coverage being offered. It is especially important to read and understand the “exclusions” and dollar limits on what the company will pay, including any exclusions and limitations, before you agree to a particular company and warranty. All home warranties contain dozens of exclusions. Many people who buy home warranties do so because of the long and impressive list of covered appliances, systems, parts, and components. Unfortunately, many buyers only discover the exclusions, conditions, and limitations that exist in every home warranty when they file a claim and have it denied.
When considering a home warranty, make sure it covers the major appliances and systems in your house. More importantly, understand the exclusions, conditions, and limitations. Lastly, you do not want to pay for coverage you do not need. For example, a warranty that covers air conditioning and a swimming pool generally will cost more than a warranty that does not. It will not make sense to buy the more expensive warranty if you do not have AC or a pool. Please read the contract closely before buying and contact the Department of Insurance if you have questions.
Required Home Warranty Terms
California law requires home warranties to specify, in clear and conspicuous terms, the following information:
- Each of the appliances, systems and components covered by the contract.
- All exclusions and limitations.
- The period during which the contract will remain in effect, the protection contract fee, and the renewal terms, if any.
- The services to be performed by the company and the terms and conditions of that performance.
- The service fee or fees, if any, to be charged for such services.
- All limitations respecting the performance of services, including any restrictions as to the time period when or geographical area within which services may be requested or will be performed.
- A statement that services will be performed upon telephonic request to the company, without any requirement that claim forms or applications be filed prior to the rendition of service.
- A representation that services will be initiated by or under the direction of the company within 48 hours after a request is made for such services by any person entitled to make such request under the contract, or the agent of such person.
How Does the Department of Insurance Protect Consumers?
The Department of Insurance investigates consumer complaints and enforces California insurance laws. Some home warranty companies have tried to sell warranties in California illegally, without a license. Some companies have a poor rating with the Better Business Bureau. Others are unaccredited with BBB and have numerous negative consumer reviews. Consumers sometimes complain about unfair claim denials and unreasonably delayed repairs. The Department of Insurance posts information about every home warranty company on our website so consumers can investigate a home warranty company’s license and track record before buying one of its warranties. You can view the company’s performance and complaint data on our public website.
How Do I Check the License Status of a Home Warranty Company?
A home warranty is not an insurance policy. However, for the protection of consumers, home warranty companies are regulated and licensed by the California Department of Insurance. Please check the license status of a home warranty company prior to purchasing a contract. To verify the license status, you can call us at 1-800-927-4357. A list of licensed Home Protection Companies can also be found on our Website, along with a summary of consumer complaints that the Department has investigated.
What Should I Do If My Claim Is Denied?
If a home protection company denies your appeal, you may seek assistance from the Department. You can call us at 1-800-927-4357, visit our Getting Help Page to Chat, or file an online Request for Assistance.