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Regulation is in place to guide home warranty companies and protect homeowners who purchase a home warranty. These regulations ensure companies maintain financial responsibility and keep consumers’ best interests in mind.
Our team highlights how government and industry self-regulation play a role in the home warranty industry. We also provide resources to resolve disputes with your provider if it isn’t honoring its contract.
What Home Warranty Regulation Does for Homeowners
State legislatures and industry associations developed regulations to protect you, the consumer. For example, most states follow the Service Contracts Model Act, developed by the National Association of Insurance Commissioners. These regulations ensure providers maintain financial responsibility and meet the necessary requirements to sell service contracts. Here is a list of requirements that many states impose on home warranty providers:
- Annual financial reports
- Reserve funds
- Surety bonds worth a predetermined amount
Statutes outline ethical business practices providers must follow, such as providing fine print that clearly lists exclusions and coverage limits. Regulations also establish guidelines on how consumers can file a complaint.
Who Regulates Home Warranty Companies?
Governmental bodies and industry associations are responsible for regulating home warranties. We list the two main types below.
Regulatory bodies that oversee home warranties vary from state to state. For example, the Department of Financial Services oversees home warranty regulation in New York, while Oregon’s Department of Consumer and Business Services oversees home warranty regulation in Oregon. Some states, such as Kansas and Michigan, don’t have a clear governmental body regulating home warranties. If you live in such a state, your state’s consumer protection agency handles issues should they arise. Industry self-regulation takes precedence in these states.
Several national trade organizations self-regulate home warranty providers in conjunction with state regulation. These organizations include the following:
The National Home Service Contract Association
The National Home Service Contract Association (NHSCA) is a nonprofit trade organization that established a code of ethics that member companies follow. In addition to creating guidelines for fair business practices, the NHSCA provides resources to homeowners who are interested in purchasing a home warranty, such as a list of vetted member companies.
Attorney Arthur Chartrand, who is of counsel to the NHSCA, states that the NHSCA routinely monitors the legislative landscape around the country to ensure member companies comply with the latest laws and regulations.
The Service Contract Industry Council
The Service Contract Industry Council (SCIC) is another prominent trade association that oversees the service contract industry. The SCIC works closely with state regulatory bodies to develop auto, consumer electronics, and home warranty regulations. Timothy Meenan, the managing shareholder at Meenan Regulatory and Legislative Attorneys Law Firm, says the SCIC passes legislation “to help strengthen the consumer protection of these products.”
Filing a Complaint
You can file a complaint with the appropriate regulatory body if you believe your provider isn’t fulfilling its contractual obligations. However, Chartrand recommends that homeowners resolve their issue with their provider directly before involving their state’s consumer protection agency. He emphasizes that “knowing who you talk to, keeping track of their name, putting it in writing, and getting it to the company” helps expedite the resolution process.
The NHSCA’s website has a complaint form you can submit to have the organization review your complaint. If your provider is a member, it sends your complaint directly to the provider’s upper management. You can also file a consumer complaint with your state’s attorney general office.
A home warranty contract covers your home appliances and major systems from normal wear-and-tear breakdowns. In addition, home warranties protect you from inconvenient repair or replacement costs, giving you peace of mind.
“The best advocate for a consumer is the consumer themselves,” says Chartrand. Before purchasing a plan, know your provider’s coverage limits, exclusions, and fees. State regulatory bodies and industry-related associations are in place for your protection if a dispute with your provider arises.
For those who are interested, our team compiled a list of the best home warranty companies in the United States.