Home warranty plans are popular among long-term homeowners and first-time homebuyers alike because they can help repair or replace home appliances or systems. Though these service contracts can provide peace of mind, they can also be the source of consternation when a customer finds out their claim has been denied.
And if online reviews are any indication, this seems to happen quite a bit.
Much of this distress can be pinned down to misunderstandings by consumers of what appliances and systems home warranties do and do not cover. There is also confusion about why a home warranty provider can deny a claim on a covered item.
In this article, you’ll learn about the most common —and legitimate— reasons why even the best home warranty companies may deny a claim, as well as what you can do to avoid claim denials.
Table of contents
Why home warranty companies may deny a claim
The appliance or system is not covered by the home warranty
A home warranty is a service contract that helps you cover necessary repairs or replacements of appliances and systems in your home. You can have a systems repair plan, an appliance repair plan or a comprehensive plan that includes both. However, not every appliance or system in your home is covered by the contract. It’s important, then, to read the fine print carefully since the exclusions vary by company and could be surprising.
Other exclusions may include specific parts of a system or appliance that won’t be covered if that particular piece breaks down. For example, your contract may cover the repair of your garage door but not the remote.
The item could also be excluded from coverage if it had a pre-existing condition (present before the warranty began) that was found to be at least partly at fault for the failure. Read our article on how home warranties work and what they cover to learn more.
The appliance was not maintained properly
Appliances and systems must be given proper maintenance in order to be covered by the home warranty contract. If the company finds that you didn’t take care of the appliance in a way that could have prevented it from breaking down, your claim could be denied.
The appliance was installed improperly or has code violations
If the appliance or system was not installed correctly or if the installation violates local building codes, your claim could be denied. This is true even if the improper installation was performed by a professional.
The appliance has unusual wear and tear
Home warranties only cover an appliance or system when it’s had normal wear and tear. The home warranty company could deny your claim if they determine you haven’t been using the item properly. So if your kids are in the habit of jumping on and off the dishwasher door when it’s open, it’s probably a safe bet your claim will be denied.
The damage was caused by animals
Some home warranty companies exclude from coverage any damage caused by animals, including pets and vermin. If the damage to your appliance or system was caused by any kind of animal, your claim may be denied.
The damage is secondary to a primary breakdown
Many companies only cover direct damage to your appliances or systems themselves. If you submit a claim for secondary damage — i.e. the dishwasher overflows and ruins the carpet — your claim could be denied. The secondary damage may be covered by your homeowner's insurance company, however.
The coverage limit was exceeded
Home warranty companies place annual coverage limits on each covered appliance or system, and often annual caps on all payouts. Even if your appliance would otherwise be covered, if you’ve already exceeded the coverage limit for that particular item, or the annual cap, you may be out of luck.
An unauthorized technician performed repairs
Your claim may be denied if you hired an independent contractor to perform repairs on a covered appliance or system. The terms of most home warranty policies stipulate that only technicians approved and hired by them are authorized to make repairs to items covered by the plan. Having someone else do the repairs —or doing them yourself— would make that specific item ineligible for coverage in the future.
How to avoid getting claims denied
The reasons we’ve mentioned above are completely legitimate reasons why a home warranty claim may be turned down. Here are some things you can do to not end up in that situation.
Read the fine print
The most important step you can take to avoid a claim denial is to read the fine print of your home warranty contract —before you buy the coverage. Be aware of everything that is covered and not covered. Make sure you fully understand the terms.
Keep maintenance records
Many home warranty companies require you to keep maintenance records so they can verify that you’ve performed the necessary routine maintenance over the years. If your contract has a stipulation like this, it’s a good idea to keep detailed maintenance records on every appliance or system in your home. That way, you’ll be better prepared to prove the appliance or system didn't suffer from a lack of maintenance.
Take steps to mitigate damage when possible
It’s important to do what you can, when you can, to prevent damage to the appliances or systems. This not only includes doing the proper maintenance on each covered item regularly but also not waiting for the damage to get worse before seeking repairs.
How to dispute a home warranty claim denial
If your claim is denied by the home warranty company and you’re certain it should be covered, there are steps you can take to reverse the decision.
- Review the claim
You may have made a mistake or not provided enough evidence to substantiate the claim. If you add more information to supplement the claim, you can request a new review of it.
- Contact the company to initiate the appeal process
Request all the paperwork needed to file a claim dispute and keep a record of your contacts with the company going forward —such as brief notes on the time and nature of all phone calls with them.
- Get a copy of the home inspection report
The company may have sent a repairman on a service call to evaluate the item before denying your claim. If this is the case, request a copy of the report.
- Request a third-party evaluation
Getting a second opinion from an independent service technician can help spot mistakes in the first technician’s report. However, this can be an expensive step, since you will need to pay for the call (which could easily cost $100 or more), so be sure the cost of the denied claim merits this expense.
- File a complaint with the Better Business Bureau
If, after taking the steps above, you feel the warranty company still hasn’t sufficiently justified the denial, consider escalating the complaint. You may start with the Better Business Bureau. The BBB is a private organization that helps consumers report businesses that aren't up to snuff. Home warranty companies tend to answer BBB customer complaints quickly, so this could be a final step before escalating to legal action or regulatory complaints.
If the previous steps don’t succeed in overturning your claim denial, it may be time to involve the authorities.
- Contact the state attorney general
The office of the attorney general is usually the entity that investigates fraud. If you believe you’ve been defrauded by the home warranty company, file a complaint with the agency.
- File a lawsuit in small claims court
Depending on the amount you believe the home warranty company owes you, you may be able to sue the company in small claims court and obtain the amount. Small claims dollar limits vary by state but typically don’t exceed $10,000.
- Hire an attorney
If the claim amount is larger than the limit for small claims court, you’ll need to hire an attorney to file a lawsuit in regular court. If the judge rules in your favor, the home warranty company may be forced to pay your attorney’s fees. If the judge doesn’t rule in your favor, however, you could be on the hook for thousands of dollars. Consult your attorney before taking this final step.
Summary of Money's Reasons Home Warranty Companies Deny Claims
- Home warranties help homeowners pay for necessary repairs and replacements of covered appliances or home systems.
- Home warranty customers are often confused about why their claim was denied. There are many legitimate reasons why this happens.
- Among the most common reasons your claim could be denied is because the item isn’t covered by the service plan, the item wasn’t installed or maintained correctly, it displays unusual wear and tear or the damage was caused by animals like vermin.
- The claim could also be denied if the damage is secondary, meaning it was caused by another item breaking down.
- Once you exceed the coverage limit for a specific item, the claim could also be denied.
- To avoid unexpected claim denials, be aware of what your home warranty plan covers and excludes, keep detailed maintenance records and mitigate the damage when you can.