Buying a home is a huge undertaking for any consumer and protecting that investment is paramount on most buyers minds. Some people opt for home warranties offered by different companies, but few people know the important answer to the question of "who regulates home warranty companies?"
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What it is
A home warranty is similar to a car or appliance warranty; if something goes wrong with the house, the warranty provider will repair it as part of the policy the owner bought. Typically, these warranties are offered by the company that constructed the home, but not always. In most cases, repairs are handled by repairmen or contractors designated by the warranty providers.
Who regulates them?
In most states, the Commissioners of Insurance regulates the activities of home warranty companies. In some states, however, there is no regulation or oversight. It is important to contact your state's Commissioner of Insurance to ensure that you are protected by laws and regulations from fraud, malpractice, or other misdeeds by the warranty-issuing company.
How it works
A home warranty company offers to sell the homeowner a policy (in some cases, it is included int he purchase price) and promises to repair or replace appliances, plumbing, or whatever else is covered in the agreement. Usually, warranty-issuing companies will opt to repair a problem, even if it takes multiple time to repair it properly, rather than replace it because the cost is much lower to repair than replace.
Home warranties are different from home insurance. First, home insurance does not cover repair bills for clogged pipes or problems with the electrical system that merely cause inconvenience. In those instances, home warranties will fix the problem for a small fee (between $25 and $100) from the consumer.
The average span of a home warranty is typically 1 year from the date of purchase. Some home owners have opted to maintain the policy, paing several hundred dollars in premiums to continue the policy. Some companies may not offer to extend a warranty, particularly if a property was not cost effective for them. In most states (that is, those with regulatory structures in place), consumers are protected from unfair practices by the warranty company, such as early termination of the warranty policy or sub-standard work or materials used in repairs.