Why Home Warranties Are Getting Big in the USA


Home warranties already are a $2 billion industry, reports, and that number is steadily growing. These businesses are booming all across the USA, although they are most popular in the south. Is this because they provide truly high value or is it just very good marketing?

What are home warranties and why are they popular?

Home warranties are a type of service that covers your home appliances and systems and will pay for whole or part of the repair cost in case they break down. The idea is similar to insurance, but instead of your home, it covers individual appliances and systems like plumbing and electrical wiring.

Homeowners pay a set amount in annual premiums (about $600 on average) and for this, if any of the covered items break down, they get assistance and compensation from the home warranty provider. The assistance is as valuable as the compensation for some people because home warranty companies serve as a middle-man between the homeowner and contractors. This means that you have only to contact the company if something happens and they take care of everything else.

The point of this protection is to help homeowners avoid big unexpected repair bills, which can throw your budget or severely dent your emergency fund. The majority of home warranties only pay for a fraction of the bill, but it’s usually enough to take off the bulk of the financial strain that can occur if some expensive appliance breaks down.

As the number of such appliances increases and the costs of repair for them climbs up, it’s not a surprise that home warranties are becoming more popular in America. Frontdoor, the owner of the biggest home warranty provider, reports a 9% rise in profits in 2018. The most lucrative areas for these businesses are the southern states.

That’s because more people in the south of the country own their houses, and those houses are bigger. For example, Arizona is one of the “hottest” states for home warranties. According to, 64% of the state’s residents own their own homes in Arizona, and the median size of a single-family home is 2.598 sq. feet states Now, consider the fact that new houses in Arizona are bigger than the national average.

Moreover, the majority of them are equipped with expensive AC systems, fans, refrigerators, and freezers. Many of those houses also have a variety of modern appliances. Plumbing and electrical systems go without saying.

All those things run the risk of breaking down. In fact, it’s higher in the south because the environment puts more strain on appliances and even house integrity. But repair services aren’t easily available in some more remote communities.

Enter home warranty companies, which do not only help reduce the cost of fixing expensive home systems and appliances. These companies also provide a quick connection to all contractors. They serve as a single point of contact for homeowners who get to save time and money because they don’t have to look for a suitable contractor on their own.

The situation is similar in Texas, and in California, there’s also the issue of extremely high contractor fees. Considering all these facts, it becomes obvious that home warranty companies strive in the southern states because they offer the most value there. However, they offer high value everywhere else as well, and that’s why this industry is getting bigger every year. For example, in South Carolina, home warranties are also hugely popular. If you would like to learn more about home warranty plans in South Carolina you can go now to the First American website where you can find plenty of helpful resources.

Are home warranties infallible?

Home warranties are useful, there is no doubt of that. However, they aren’t infallible. In fact, companies providing them often face criticism and some of them were even involved in major scandals. For example, the Wells Fargo and Trucoat scandals where AHS was involved, or a $780,000 settlement that Choice had to pay for misleading advertisement.

Consumer forums are full of stories from angry homeowners who were failed by their warranty providers. The most common complaints from them are:

  • The company not honoring its promises.
    Many a customer has suffered from the home warranty company not paying out the money they should have. The providers are creating contracts with loopholes and using other tricks to avoid paying both legally and not so much. That’s why it’s essential to choose the provider carefully and research their reputation online. You should study independent reviews as well as consumer portals like Yelp and Google Reviews to understand is the company can be trusted.
  • Bad contractors.
    Home warranty companies work with specific contractors, so you won’t be able to choose experts who will repair your appliances. Objectively, sometimes these contractors won’t be the best skilled or affordable. Prior research will help you learn what exactly you can expect when buying a warranty from a specific provider.
  • Avoidance of replacements.
    While your home warranty plan might cover appliance replacement, you should prepare that the chance of it actually happening isn’t big. Replacements are expensive and home warranty providers want to save money whenever they can. It will be more cost-efficient for them to pay for contractors to fix some recurrent issues every few months than to replace an expensive appliance.

You also need to be aware that all home warranty contracts have a maximum payout limit. This means that this plan won’t cover expensive repair in its entirety. You should research which parts of your appliances are most likely to break down and how much the repair will cost. Then, make sure that the warranty you buy has a high enough limit to pay for this.

And most importantly, study the contract to the letter. Hiding some hidden fees or clauses in the fine print is a common issue for this industry. This means that you should be on the lookout for the most honest and transparent home warranty provider you can find. They might not offer the best terms, but trustworthiness is a priority in this business.

With the rising popularity of home warranties, the number of companies offering these services is growing as well. It’s getting harder to choose the best and most reliable option as many new providers have very little public information. Customers should be extremely careful when buying plans from these businesses. Being a veteran of the industry is a good endorsement for home warranty providers.