Many homeowners wonder if home warranties are a legitimate investment or a scam. While reputable home warranty companies exist and provide valuable coverage, some companies engage in deceptive practices, leaving customers feeling deceived. 

In this article I’ll talk about the common reasons home warranties are viewed as a scam, which home warranty companies to avoid and what to do if you encounter a home warranty scam. I’ll also give you the top home warranty companies to consider for your home. 

5 reasons why people believe home warranties are a scam

You may have heard horror stories about home warranty companies that mistreat customers and hide costly exclusions in the fine print. Dishonest companies with a bad reputation and a tedious claims process create distrust among homeowners. Potential home warranty buyers may avoid these extended warranties altogether.

Below are the top reasons homeowners believe home warranties are a scam:

  1. Unclear terms—Without carefully reading the exclusions and fine print of your service contracts, you may miss where it says that improperly maintained home systems aren’t covered or your hvac is covered only up to a certain amount.
  2. Unexpected costs—Some warranty providers may charge you a service fee every time your refrigerator breaks, while others will charge you a one-time service fee when repairing that specific appliance. Review your home warranty contract and determine if there are extra charges and coverage limits you should be aware of.
  3. Difficult cancellation process—The cancellation process should be straightforward and easy. Many home warranty companies will require a 30-day written notice in advance of cancelling.
  4. Claim denials—Each warranty provider has a claims process. Since it’s up to the home warranty company to determine if a claim is approved or not, denied claims lead to frustration among homeowners. Confusion about appliance repairs and the replacement policy is common. Home warranty companies do not automatically replace faulty appliances. Most companies will pay you the depreciated value of the broken item, leaving homeowners with unexpected expenses.
  5. Repair delays—The most reputable home warranty companies will send a service provider to your home within 48 hours of your initial call. Some homeowners file a claim and go days without a technician coming to their house. If the home warranty company repeatedly ignores phone calls, homeowners feel they have been the victim of a scam.

Home warranty companies to avoid

Some of the worst home warranty companies have a history of scamming their customers. Creating false charges on credit cards, and not addressing issues promptly are common complaints. Poor customer service, and charging too much in annual premiums and service fees have also occurred.

Below are some of the worst home warranty companies in the industry that have recently gone out of business due to their unethical business practices:

Service America

  • Poor company performance
  • Couldn’t handle industry competition
  • Closed down in 2018

Endurance Home Warranty

  • Closed down after being in business since 2017
  • Consumer review sites had many negative reviews about the business
  • The BBB received multiple negative complaints that were unable to be resolved since the company’s email and phone number went unanswered
  • Closed down in 2018

Allied Home Warranty

  • Customers had issues submitting claims to phone agents
  • Poor overall customer service and repair technicians
  • Closed down in 2018

American Home Guard

  • Complaints of not paying contractors for the work completed
  • Poor customer service
  • Complaints of the company not sending out a service technician after a claim was filed
  • Closed down in 2018

Secure Home Warranty

  • Charged customers for service contracts but didn’t pay for the repairs
  • Customers unable to file complaints, or complaints went unanswered
  • Closed down in 2018

What to do if you’re dealing with a home warranty scam

If you’re a victim of a home warranty scam, report the issue to a law enforcement agency. Reporting the home warranty company is crucial because it helps these agencies collect accurate data on the number of people affected by scams.

You can report a home warranty scam to:

  • Your state’s department of insurance
  • The Attorney General’s office
  • The Better Business Bureau (BBB)
  • Your state’s consumer protection agencies

Tips to help you avoid a home warranty scam

To prevent being scammed by a home warranty company such as Secure Home Warranty or Endurance Home Warranty, look for red flags. I recommend you take these steps to protect yourself, your real estate, and your finances.

  • Review online customer reviews and ratings. Pay attention to negative reviews.
  • Consider how long the company has been in business.
  • Check with your state’s Department of Insurance or Attorney General’s office to find out if any homeowner complaints have been filed against the home warranty company.
  • Avoid companies with aggressive or inaccurate phone calls and sales tactics.
  • Get a home inspection before signing up for home warranty coverage to help you understand the condition of your systems and major appliances.
  • Review the terms and conditions in your home warranty contract before signing. Pay special attention to the fine print and exclusions.
  • Compare annual costs and service fees to make sure they align with the costs of other home warranty companies.

Questions to ask to ensure you’re not being scammed

I recommend asking these questions to make sure you won’t become a victim of scammers with shady business practices:

  • How long has the home warranty company been in business?
  • Does the home warranty company have a high BBB rating?
  • How many BBB complaints has the business resolved?
  • What do customer reviews say about the company?
  • What does the claims process look like?
  • Is there a cancellation fee?

Are all home warranties a scam?

Though some home warranty companies are dishonest and should be avoided, not all home warranties are a scam. Many reputable home warranty companies have satisfied customers, high business ratings, and positive customer reviews.

These companies have responsible customer service teams, are responsive to claims, and send service technicians to their customer’s homes in a timely manner. Reputable home warranty companies also have clear terms and conditions and set expectations on what can be repaired or replaced while under warranty.

Benefits of a home warranty

Home warranty plans can cover unpleasant (and unexpected) expenses when a major system or appliance breaks down. This home appliance insurance can also offer the following benefits:

  • Not all homeowners have the DIY skills or expertise to handle repairs on their own, warranty companies provide a network of local, trusted technicians to perform the work.
  • Home warranties cover the repair and replacement costs of major appliances and systems like your plumbing, electrical, air conditioning, refrigerator, water heater, washer, dryer, and dishwasher.
  • When selling your home, having a home warranty protects your investment while your house is on the market.

Drawbacks of a home warranty

Though a home warranty plan can save you time and money, there are a few disadvantages to enrolling in a plan:

  • There are coverage limits on how much a home warranty company can pay for a repair or replacement, leaving the customer to pay a difference.
  • A home warranty company can deny claims if the item wasn’t installed correctly or hasn’t been properly maintained.
  • If an appliance needs to be replaced, the homeowner may be limited on what the make and model of the replacement looks like.

How to find the best home warranty company

Take these recommended steps to find the best home warranty company for you:

  1. Ask friends and family for recommendations
  2. Read online reviews and check BBB ratings
  3. Understand exactly what you need covered in your house
  4. Compare home warranty plans
  5. Verify that the home warranty company services your zip code
  6. Carefully read the terms and conditions before signing a home warranty contract

Some of the best home warranty companies share the following qualities:

  • Excellent customer experience—The best home warranty companies offer 24/7 customer support services online or through a customer service phone number.
  • Transparency—Top-rated home warranty companies are transparent about pricing, plan details, and coverage limits and exclusions.
  • Flexible home warranty plans—Plans with flexibility allow policyholders to select the systems and appliances they want protected and offer multiple options.
  • Easy claims process—The top home warranty companies have a straightforward claims process, reasonable service fees and fast turnaround times.
  • Additional benefits—Some home warranty companies offer additional benefits to their customers. They allow customers to add on extra services beyond standard coverage. Some providers offer one month of free coverage. Other companies allow customers to select a no-fault protection plan. These types of perks can distinguish providers in the home warranty industry.

Top home warranty companies to consider

The most reputable home warranty companies have been in business for several decades. They have established a good industry reputation over time. These companies have a transparent claims process that is clear to customers. They offer flexible plans to meet different needs and budgets. Additionally, reputable providers provide 24/7 customer service support.

At Today’s Homeowner, trust and transparency with our readers is important. Below is an objective rating system of different home warranty providers according to our rating methodology. The rating system involves a weighted, 100-point scale that scores home warranty companies on plans offered, coverage, state availability, cost, trustworthiness, customer service, and unique benefits.

Based on research, here are several of the best home warranty companies in the industry:

Star Rating
Monthly Cost
Service Fee
States Not Covered
Best Overall
Most Cost-Effective
Most Customizable
Quickest Service
not specified
Most Trustworthy
not specified

Is a home warranty worth it?

For most homeowners, a home warranty is absolutely worth the investment. Your homeowner’s insurance doesn’t cover repairs or replacements for many major systems and appliances in your house. As an industry standard, these items typically have a lifespan of around 10 years and will likely need some maintenance along the way. A quality home warranty gives you priceless peace of mind knowing you’re covered when inevitable breakdowns occur and repairs or replacements are necessary. From my experience as a Realtor for the past two decades, I can confidently say purchasing a home warranty plan is a smart move. If you own a rental property, a rental property home warranty will provide long-term cost value.

Buying a home warranty may be a smart purchase for:

Looking for more information on home warranty companies? Check out some of our other expert reviews to get all the details you need. Remember, each of these companies gives a free quote.

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Reviewed for accuracy, cost data, industry best practices, and expert advice by Laurie Engle
Editorial Contributors
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Alora Bopray

Staff Writer

Alora Bopray is a digital content producer for the home warranty, HVAC, and plumbing categories at Today's Homeowner. She earned her bachelor's degree in psychology from the University of St. Scholastica and her master's degree from the University of Denver. Before becoming a writer for Today's Homeowner, Alora wrote as a freelance writer for dozens of home improvement clients and informed homeowners about the solar industry as a writer for EcoWatch. When she's not writing, Alora can be found planning her next DIY home improvement project or plotting her next novel.

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Laurie Engle

Expert Writer & Reviewer

Laurie Engle is a freelance writer who provides insights to homeowners on topics such as the home warranty industry, relocation issues, and real estate trends. As a licensed Realtor since 2001 Laurie has acquired extensive expertise in dealing with home warranty companies and navigating the intricacies of the real estate market. In addition to her commitment to helping clients with their home buying and selling needs, she maintains a sharp awareness of market dynamics, including property values, interest rates, and local regulations.

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