By: Tracy Morgan

Buying a home is a significant milestone, and many homeowners choose to protect their investment with a home warranty. These plans can serve as a vital safety net, covering the repair or replacement of major home systems and appliances. However, not all claims are approved, leaving homeowners frustrated and facing unexpected out-of-pocket expenses. Let’s explore the four main reasons why home warranty claims are denied and explore effective strategies to avoid these common pitfalls.

Lack of Proper Maintenance

The number one reason for home warranty claim denials is a lack of proper maintenance. Many homeowners don’t realize that their warranty requires them to regularly take care of their home systems and appliances. This means changing filters, cleaning coils, and scheduling annual check-ups for your HVAC system, among other tasks. Neglecting these responsibilities can lead to claim denials and potentially costly repairs.

Garrett Lamb, Owner of We Buy Houses Fast, shares his insights: “I’ve seen countless homeowners face claim denials due to neglected maintenance. In my experience, setting up a simple maintenance schedule can make all the difference. I always advise new homeowners to keep detailed records of their maintenance activities. This helps prevent breakdowns and provides solid evidence if you need to file a claim. Remember, a well-maintained home is not just about avoiding claim denials – it’s about preserving your investment for the long haul.”

To prevent claim denials due to lack of maintenance:

• Create a comprehensive maintenance calendar for all covered items
• Keep detailed receipts and records of all maintenance work performed
• Follow manufacturer guidelines for care and upkeep of your appliances and systems
• Schedule regular professional inspections for complex systems like HVAC
• Set reminders for routine tasks such as changing air filters or flushing water heaters

2. Pre-existing Conditions

Another common reason for claim denials is pre-existing conditions. Home warranty companies typically don’t cover problems that existed before the policy started. This can be tricky, as some issues might not be apparent until they cause a breakdown. Understanding the condition of your home systems and appliances is crucial before purchasing a warranty.

Jessica Wright, Owner of Buy My Home Chattanooga, offers her perspective: “In my years of real estate investing, I’ve learned the importance of thorough home inspections. Before purchasing a home warranty, I always recommend getting a comprehensive inspection. This helps you understand the condition of your home systems and appliances and provides a baseline for your warranty coverage. If an inspector notes that your water heater is nearing the end of its life, for example, you can address this before it becomes a pre-existing condition under your new warranty. Being proactive in this way can save you from future headaches and unexpected expenses.”

To avoid denials due to pre-existing conditions:

• Get a thorough home inspection before purchasing a warranty
• Be honest about the condition of your home systems when applying for coverage
• Address any existing issues before your warranty period begins
• Keep records of repairs made prior to warranty coverage
• Consider having a professional assessment of major systems before the warranty purchase
• Document the current condition of appliances with photos or videos

3. Improper Installation

Sometimes, a claim might be denied because the item wasn’t installed correctly in the first place. This often happens with DIY installations or when unlicensed contractors are used. Improper installation can lead to premature wear and tear or malfunction, which your warranty may not cover.

Gregory Rozdeba, CEO and Co-Founder of Dundas Life weighs in: “While my expertise is in life insurance, the principle of due diligence applies across all types of coverage. When it comes to home systems and appliances, proper installation is crucial. I always encourage homeowners to use licensed, insured professionals for installations. It might cost more upfront, but it can save you from costly claim denials down the road. Plus, having documentation of professional installation can be a powerful tool if you need to dispute a claim denial. It’s all about protecting your investment and ensuring you can fully benefit from your home warranty when you need it most.”

To prevent denials due to improper installation:

• Use licensed and insured professionals for all installations
• Keep detailed documentation of installations, including receipts and warranties
• If buying a home, ask for records of previous installations and any warranties
• Consider having newly purchased items professionally installed, even if it costs extra
• Verify that installations meet local building codes and manufacturer specifications
• Take photos or videos of the installation process for your records

4. Exceeding Coverage Limits

Many homeowners are surprised to learn that their home warranty has coverage limits. These can be per-item limits or overall annual limits. Exceeding these limits can result in partial or full claim denials, leaving homeowners to cover the remaining costs out of pocket.

Andy Griffin, Gold Value Advisor at Family Gold Buyers, shares his thoughts: “In my line of work, I often meet homeowners looking to sell gold items to cover unexpected home repair costs. Many of them have home warranties but found themselves exceeding coverage limits. My advice is always to read your policy carefully and understand your limits. Consider setting aside some savings to cover potential overages. It’s also worth shopping around for policies with higher limits if you have older or more valuable home systems. Remember, a home warranty is a tool for financial protection, but it shouldn’t be your only line of defense against major home repair expenses.”

To avoid denials due to exceeding coverage limits:

• Carefully review your policy’s coverage limits for each item and overall annual caps
• Consider upgrading your policy for higher limits if needed, especially for older homes
• Set aside savings to cover potential overages or deductibles
• Get multiple quotes for significant repairs to ensure you’re not overpaying
• Understand what alternatives your policy offers, such as cash payouts
• Consider supplemental coverage for high-value items not fully covered by your warranty

Additional Tips for Maximizing Your Home Warranty

Beyond addressing these four main reasons for claim denials, there are additional steps you can take to get the most out of your home warranty:

1. Read and understand your entire policy, including fine print and exclusions
2. Keep a file with your policy, maintenance records, and related documents
3. Act quickly when you notice issues to prevent further damage
4. Follow the correct procedure for filing claims as outlined in your policy
5. Consider the age and condition of your home when choosing coverage options
6. Regularly review and update your coverage as your home’s needs change

In conclusion, while home warranties can provide valuable protection, it’s crucial to understand your policy and take proactive steps to prevent claim denials. By maintaining your home systems properly, addressing pre-existing conditions, ensuring proper installation, and understanding your coverage limits, you can maximize the benefits of your home warranty. Remember, a little preparation and knowledge can go a long way in protecting your home and your financial well-being. With these strategies in place, you’ll be better equipped to navigate the world of home warranties and ensure that your investment is well-protected for years to come.

Published by: Josh Tatunay