NBC 5 Responds

Residential Service Contracts: What They Are and What They Cover

NBCUniversal, Inc.

Todd Fields of McKinney experienced an HVAC outage last summer, causing him to be without air conditioning. He had coverage with Home Warranty of America, also known as HWA, but, his claim was denied for repair or replacement.

Not understanding why he was denied, Fields reached out to NBC 5 Responds for help. We contacted HWA and they offered a buy-back that pays out the cash value of the system and prohibits any future claims.

NBC 5 Responds gets lots of questions about home warranties. We contacted the regulating agency, the Texas Department of Licensing and Regulation, TDLR, to answer how to choose one and what they cover.

In Texas, these home warranties are actually residential service contracts. "What that means is residential service contracts cover the cost of repair or replacement for large appliances in a home or for certain systems that are in the home, like the plumbing, the air conditioning and the heating systems, under certain circumstances," said assistant general counsel for TDLR Elizabeth Salinas-Strittmatter.

Salinas-Strittmatter advises doing two things before signing a contract, saying, "Number one, they should make sure that the provider or the administrator of the residential service contract is licensed by the Texas Department of Licensing and Regulations, and they can check for licensure through our website. The second most important thing is they need to read their contract. Understand exactly what is covered and understand the circumstances under which their coverage will kick in."

You should do your research on the company's reputation. You can check the Better Business Bureau website for complaints against the company. But, you should know, these contracts are not required for a home purchase. Salinas-Strittmatter says, "These are completely optional contracts, and the companies that you choose are completely optional as well."

If you have an issue with a licensed company, TDLR has an ombudsman that may be able to help.

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