Home Warranty Businesses are Thriving in Massachusetts...

But do they provide good coverage?

Home warranties are one of the more controversial industries. Whilst they’re not spilling oil into the ocean or dumping waste into 3rd world countries, they are frequently seen to be ripping off American citizens.

Getting a home warranty very much boils down to vulnerabilities. We feel vulnerable knowing that our most necessary survival tools (water, heating, cooker and so on) will break down suddenly. Knowing just how expensive, stressful and timely breakdowns can be to resolve, we look to insurance so that we’re always covered when things go wrong. 

Home warranties know this, and because it still remains to be a somewhat infant industry, the lack of competition and/or market history has led to some exploitation. A quick look around the Better Business Bureau (BBB) and you’ll be met with floods of complaints against companies, as well as poor ratings.

Whilst it’s not all companies that are proactively being deceptive and cruel, it seems that there’s been enough to tarnish the reputation of the industry as a whole. These companies are not just the minute peripheral companies either, many well-known large entities are in serious trouble.

Choice Home Warranty

If we take Choice for example. They are currently sitting at the bottom of the list in terms of ratings on BBB, with a B-. Whilst the BBB can’t always be trusted 100% (allegations of pay-to-play with membership fees), there is no doubt that Choice have been performing unscrupulous activities. 

Currently, the Arizona Attorney General is filing a lawsuit against Choice Home Warranty for consumer fraud. The allegation is that the company was making false promises to clients. Choice, who are based in New Jersey, is being accused of having millions of dollars in revenue from Arizona custom, but is unfairly denying claims, using payment caps as well as contract exclusions.

In a news statement, Attorney General Mark Brnovich stated "If a home warranty company promises full and timely repair or replacement of appliances, they’d better deliver, especially when someone’s A/C breaks in the middle of summer".

This isn’t the first time either, as Choice once paid a $780k settlement in 2015.

How to tell if a home warranty will provide coverage?

The first question you will ask yourself when looking into getting a home warranty is: do they provide extensive coverage?

At the heart of this question is true uncertainty — you will never definitively know until you sign up and something actually breaks down. But whilst there’s always going to be an element of uncertainty, there are two things to bear in mind.

Trustworthiness

Firstly, how often has the company in question previously adhered to their promised coverage? 

You want to ensure that when you pay a home warranty a hefty premium, they will cover exactly what they have promised. As we can see above, Choice Home Warranty struggled with this, as they thought it would be more profitable to not stick to their word. 

This is about trust, and some companies understand that trust brings them repeat customers and a good reputation, whilst others believe that they can flyby — pop up a company, take as much money as possible and then wind up getting shut down.

There are a few telltale signs to look out for. Firstly, a company that has been around a long time is less likely to have built their business model on lies. Lawsuits do happen, as we can see, and consistent lying will not work in the long run. Therefore, it’s not a good idea to place your trust in a brand new company.

Secondly, you want to check online reviews. This can be through the BBB, but this isn’t always trustworthy either. What’s better is to look at the aggregate customer review of a company — this is the net reaction to a service.

Of course, bad reviews exist in even the best of companies. A support worker having a bad day could give a company a terrible review, and this can’t be taken as a complete representation. Instead, look for review sites that have a lot of reviews, and see if there’s many more positive ones than negative. It’s a game of possibilities after all, and the more data the better. Also, look for themes within the bad reviews as some are less serious than others.

Lastly, ask neighbours and friends to verify the company if they also used it. Online review sites are great, but you’re at risk of misinterpreting them (for example, some sites are generous, and others aren’t trusted themselves, like Yelp). First hand experiences from people you trust is a good bet on ensuring you will be covered.

Terms and Conditions

Secondly, the terms and conditions are what will give you a clear idea on whether or not you’re going to be fully covered.

Of course, not all claim denials are in bad faith or outright scams. Sometimes they are sticking to their word, but you just haven’t listened to their word. 

Some companies are perfectly consistent and trustworthy, it’s just that their terms and conditions are a little tricky to read. You have to really dig into the small print to find out what you’re going to be covered for, and what you’re not. 

It’s also worth bearing in mind that purposefully convoluted and verbose terms and conditions can be a sign of an untrustworthy. If they’re going out of their way to trip you up, it’s best to stick to your gut feeling about them and stay away.

Final word

There is an inherent flaw in the home warranty industry right now. The purpose of insurance is to hedge against risk, yet, you’re forced into a scenario in which picking the right company comes down to a gamble. You can never be 100% sure of your treatment, as there could be managerial changes the second you sign up to a previously reputable company, for example.

What you can do though, is minimise your risk, by opting for the most reputable company with a great track record. You’re likely going to pay a little more for that in premiums, but it’s better than the alternative.


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