Don't let home warranty fraudsters pile on the pain after an appliance breakdown : Internet Scambusters #1,098
With appliance and home system repairs that can run into many thousands of dollars, taking out "insurance" via a home warranty seems like a no-brainer.
But this $3.6 billion business sector is a favorite hunting ground for scammers, and victims often don't realize they've been defrauded until the last minute.
But in this week's issue, you can learn about the most common types of home warranty fraud, the warning signs, and the protective action you can take.
Let's get started…
How To Spot a Home Warranty Scam and Beat the Fraudsters
If, like most of us, you find yourself asking "What's next?" after an appliance breakdown, you may be kicking yourself for not taking out that home warranty you read about in a flyer, mailer, or online.
And if you do have a warranty, this will be a test of your faith in the warranty provider's promise they'll put things right quickly and at minimal cost.
Although that's what happens in the majority of cases, a quick Google search will show you the Internet is littered with woeful tales of home warranty scams.
By knowing how to spot them and protect yourself, you could not only save yourself a lot of money but also avoid the pain of chasing the fraudsters and burning up days, weeks, or even months of frustration when you just want the thing, whatever it is, fixed ASAP.
Why You're At Risk
In simple terms, a home warranty is a lot like an insurance policy. You pay a premium and if things go wrong with major appliances or utility systems, the "insurer" covers all or most of the cost of repairing or replacing them. It's a $3.6 billion market.
But warranties vary from company to company in terms of what they cover and how much they'll pay. For example, are pre-existing issues covered (probably not), can you choose the contractor/supplier, is there an age limit on replaceable/repairable systems and devices?
If you don't know the answers to these questions, you may not have the protection you think you have.
And if you don't know how trustworthy the provider is, you may discover too late that your warranty is actually worthless.
The Most Common Home Warranty Scams
If you've never received a message saying your home warranty expired - whether you have coverage or not - you're a lucky exception. These emails and letters, usually sent out at random, complete with payment slip, are by far the most common form of this type of scam.
Sometimes they're genuine solicitations, but any company that promotes its wares this way should be regarded with suspicion, at best. We say: Trash them.
Other warning signs to look out for include:
- There's no written contract.
- There is a contract but it's confusing, with lots of fine print and all manner of get-out clauses. Short and over-simplified contracts are just as bad, leaving holes through which a crooked provider can slip.
- Hidden/unlisted fees, such as call-out charges, copies of deeds, and unreasonable coverage limits. They're often tagged onto low-ball premiums.
- High pressure and aggressive sales tactics. "Act now" means you're being pressured. Same goes for repeated phone calls and messaging. And if a reminder is tagged "Final Notice," it's probably a scam.
- No guarantees of workmanship or quality of products.
- Fake warranty companies. The provider isn't real and you have no protection, but you won't find out until you try to contact them or make a claim.
- Discount vouchers and refunds. Scam reminders sometimes have fake coupons or vouchers supposedly worth a couple hundred dollars. Often, they look like checks, but they're not.
- Difficult cancellation process and long waits for attention to your problem.
- Denying or delaying legitimate claims by referring to fine print exclusions or vague reasons, like your lack of maintenance. Sometimes customer records are altered to make a fault look like a pre-existing condition.
- Bait and switch. Like extra fees (see above) or sending out poor technicians then charging again for a second visit.
How To Safeguard Yourself Against Home Warranty Fraud
As with most scam-avoidance tactics, the most important thing you can do to protect yourself is to thoroughly research the provider you're thinking of using. The basics of this are to check what other users say about them, their rating with trust organizations like the Better Business Bureau, and their state insurance department registration.
Pricing is crucial too. Annual premiums usually cost between $500 and $700, but remember that the cheapest is rarely the best, especially if they're a lot lower than others.
Other steps you can take to protect yourself against home warranty scams include:
- If you don't already have a warranty and you get a "reminder," it's a scam.
- If there's no contract, don't buy.
- If there's a contract, read every line of this and any other terms and conditions documents. Ask questions about anything you're not clear about. You need to know exactly what's covered. And keep records of all communications.
- Establish exactly what extra fees and deductions you'll have to pay.
- Understand the call-out times and claims process and compare with others. It should be quick and easy.
- Check the source of any reminder or notification. If it seems to come from an organization you already do business with, contact them directly. If it comes out of the blue, beware.
- Get recommendations from friends, family, neighbors, and realtors.
- Be wary about providing confidential personal information until you're at the right stage of the research and decision process
- Check if you might be duplicating existing coverage such as manufacturers and retailer warranties, especially on newer appliances. Unscrupulous warranty providers will use this as a get-out.
- Know the scope of coverage - just wear and tear, manufacturing defects, or accidental damage, for example.
- Try to speak to a human and know how and when you can contact them - 24/7 for instance. If everything seems computer driven, beware.
- Find out what the usual call-out time is. The best firms send a tech out within 48 hours.
- If you just bought a home and it doesn't come with a warranty, have systems checked as part of a home inspection so you'll have an idea of likely risks.
Finally, if you discover you've fallen victim to a home warranty scam, report it to your state insurance department, the Federal Trade Commission, and the Better Business Bureau.
This Week's Alert
2024 outlook: Hot on the heels of our review last week of scam prospects in 2024, the non-profit Identity Theft Resource Center (ITRC) has issued a warning, echoing our own, about the fraudulent use of artificial intelligence (AI). Record levels of data breaches during 2023 will also feed a big increase in ID theft. Read the full report: Identity Theft Resource Center 2024 Predictions (PDF).
Time to conclude for today -- have a great week!