Ever heard of a home warranty policy or considered applying for one? Well pay attention so you don’t get burned by this not-so-ethical industry.

What is a home warranty?

• A home warranty is a service contract that covers the repair and replacement costs of home appliances. For an annual fee of $250 to $600 the warranty generally covers equipment and appliances such as dishwashers, plumbing systems, electrical systems, etc. that fail due to normal wear and tear. Air conditioning, pools, spas, wells, and sometimes roofs can typically be added to the basic policy for an extra fee. Coverage varies significantly across warranty companies.

How it works.

• The warranty company contracts with local repair companies to provide service. If something breaks, the homeowner calls the warranty company, who arranges with the local company to dispatch a repair technician.

Here is the problem (loophole).

•  When applying for a home warranty many companies don’t require any documentation on the current condition of the home or inspections. They simply take your word for it. Yet when it comes time to file a claim on a faulty item covered on your policy, the company sends out a technician to verify the claim. If the technician finds a pre-existing, condition the claim is denied. There is your loophole — companies that don’t require documentation or inspections leave themselves a safety net to reject your claim since there was no documented proof that everything was in working order originally. It’s your word against the warranty company’s technician. The company will usually side with the technician every time.

Here are some useful links featured on Squidoo with home warranty information for consumers.

Home Warranties Not Always What They Seem

My Three Cents

Consumer Affairs.Com

Article at Home Warranty Reviews

Warranty Firm Probed for Fraud

Complaints.com – Home Warranty Complaints

American Home Shield Complaints

Complaints Board