Connecticut homeowners should keep an eye out for potentially deceptive advertisements by home warranty companies trying to trick people into buying expensive warranties they don't need or want, according to Connecticut Attorney General William Tong.
A home warranty is a type of service contract, also called an extended warranty, that promises to pay out money in the event a homeowner needs to repair or replace components in their home, a press release by Tong said.
While some home warranty companies may offer legitimate services, consumers should be cautious. Home warranties may cost hundreds of dollars per year but not provide the coverage homeowners expect. It may cover items that are already warrantied, and may impose high deductibles and service fees, according to the release.
According to Tong, some warranty companies appear to be trying to trick homeowners into signing up by sending letters made to look as if they are from the homeowner’s mortgage lender.
These letters may have information including the real mortgage lender's name, the loan amount, and include phrases such as, "Final Notice," "Final Attempt to Notify You," or Immediate Response Requested," to create a false sense of urgency and have homeowners act fast, the release said.
The letters may even mention “finance charges” or warn that the homeowner may be “financially liable” without a warranty.
This language is used to frighten homeowners, however, a home warranty is never required, and a mortgage company will never send a threatening letter about buying one, Tong said.
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"If you receive a mailing from an unidentified sender encouraging you to sign up for a warranty or other service, that is a red flag," Tong said.
Tong said consumers considering a home warranty should consider the following:
• Don’t confuse a home warranty with homeowner’s insurance, which mortgage lenders typically require. Homeowner’s insurance covers property damage or liability in the event of an accident; a home warranty generally only provides for repairs or replacement to certain items in your home such as appliances.
• Consider whether you need a warranty. Is there already a manufacturer’s warranty on big-ticket items such as appliances? Does the credit card you used to purchase an appliance provide a warranty? If you built a new home, is the builder’s warranty still in effect?
• Decide whether it makes financial sense to buy a warranty. What is the cap on what the company will pay out when you need it? Do the premiums, deductibles, and service fees exceed what it would cost you to repair or replace items on your own?
• Read the fine print. Are there exclusions that make the warranty less useful, such as for damage caused by wear and tear, manufacturer defects, or natural disasters? Does the warranty provide for replacement of damaged items, or only repairs? Do you get to choose the contractor who makes the repair?
• Look for consumer reviews about the warranty company. The Better Business Bureau (BBB) is a good place to look. Have others reported difficulties with customer service, or getting the warranty company to pay claims?
Tong also urged any consumers to never give out any personal information to companies they don't recognize.
Connecticut homeowners who believe they have been harmed by a home warranty company’s advertising are encouraged to contact the Office of the Attorney General at 860-808-5318.