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Guidelines for Purchasing a Home Warranty

March 23, 2012 — (Tallahassee, FL) – Since 1988, the Service Contract Industry Council (SCIC)
has been the leading advocate on behalf of consumers and the home service contract industry,
making sure that the legal environment for home service contracts (often referred to as home
warranties) is consistent from state to state. “Consistency across all 50 states helps to regulate the
industry and ensure customer satisfaction and protection,” said Timothy J. Meenan, executive
director for the SCIC.

The SCIC offers the following guidelines when purchasing a home service contract for your
home this spring.

What is a home service contract?
The typical home service contract is a one-year contract that protects a homebuyer or current
homeowner against the cost of unexpected repairs or replacement of major systems and
appliances that breakdown due to normal usage or defects in materials or workmanship. A home
service contract can:

 lessen the risk of costs and delays if a system, system component or appliance
malfunctions during the selling process;
 help to resolve issues discovered during the home inspection stage;
 reduce any after-sale liability by a seller;
 add value and improve marketability of homes; and
 increase a buyer’s confidence in their home investment.

Who sells home service contracts?
Realtors, builders and independent providers sell home service contracts. A home service
contract can be purchased at any time, including at the time of purchase, and is usually
transferable to a new owner, although a small transfer fee may apply.

What is the difference between a home service contract and homeowner’s insurance?
 Home service contracts typically cover the major systems in your home in the event of
breakdown or malfunction including electrical, plumbing, heating and air conditioning
systems, and built-in appliances such as ranges, washers and whirlpool baths.
 Homeowner’s insurance covers the structure of a home and personal belongings in case of a
fire or natural disaster such as hurricanes and lightning, and provides liability coverage in
case someone is injured on the property.
 Home service contracts are optional in real estate transactions.
 Homeowner’s insurance is almost always required, especially if the buyer has a mortgage.

 A home service contract is not a substitute for a homeowner’s insurance policy. A home
service contract is a beneficial supplement to a homeowner’s insurance policy as
homeowner’s policies generally do not cover items for breakdowns or malfunctions due to
normal wear and tear or defects in materials or workmanship.

Do I need to be buying or selling a home to purchase a home service contract?
No. A home service contract provides valuable protection for current homeowners when a
system or appliance fails.

Can I transfer my home service contract to the new buyer of my home?
Most home service contracts are transferable and may offer the option to allow the buyer to
change or upgrade the service contract. A low-cost transfer fee may apply.

Can I customize the home service contract to meet the needs of my home?
Yes, but fees may apply. You may be able to purchase a home service contract that covers
smaller appliances such as ceiling fans and built-in microwaves. Additional fees apply for
coverage for private wells and septic systems.

How are contractors screened?
SCIC member companies typically put their contractors through a rigorous screening process
that includes state license verification, detailed reference verification, and background checks.

How do I file a claim?
Homeowners are given a toll-free number to call. The home service contract company will verify
your coverage and dispatch an independent contractor to assess the problem and replace or repair
the item as necessary. A service fee, $50 on average, is charged per service visit.
What Can Cause a Denial of Payment?
• Improper maintenance
• Code violations
• Unusual wear and tear
• Improper installation

What is generally NOT covered?
• Outdoor items such as sprinklers
• Faucet repairs are not covered under all plans
• Garage door openers
• Spas or pools, unless specific coverage is requested
• Permit fees

What are the consumer’s responsibilities?
Home service contract coverage varies from state to state and from policy to policy so the
consumer needs to:
 Request a copy of the contract before buying  Read the provisions carefully and become thoroughly familiar with all coverage,
limitations and exclusions
 Carefully fulfill all contract responsibilities, such as regular filter changes for your
heating/air conditioning systems.
 Keep the service contract paperwork, original receipt(s), and all maintenance records
 Research the service contract company

About the SCIC:

The Service Contract Industry Council is a national trade association that has been instrumental
in working with state legislators and regulators across the country to develop laws to protect

For more information, visit
Jane Meehan Lanzillo
(617) 417-0078
(617) 244-0448
[email protected]

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