Your AC quits in August. Your water heater gives out the week your in-laws visit. A home warranty promises to soften the blow, but what does it actually cover, and is it worth it?
Here is how home warranties work in Texas, who regulates them, and what to check before you buy one.
Quick answer: In Texas, home warranties are legally called residential service contracts, and the companies that sell them must be licensed. Since September 1, 2021, they have been regulated by the Texas Department of Licensing and Regulation (TDLR). A home warranty generally covers repair or replacement of covered home systems and appliances due to normal wear and tear, which is different from homeowners insurance.
What a Home Warranty Is
Texas law does not use the phrase "home warranty" in its statutes. These products are regulated as residential service contracts under the Residential Service Company Act, Chapter 1303 of the Texas Occupations Code.
In general, a residential service company agrees, for a fee, to repair or replace covered home systems or appliances when they fail from normal wear and tear.
Home Warranty vs. Homeowners Insurance
They are not the same thing, and you may want both:
Home warranty | Homeowners insurance | |
|---|---|---|
What it is for | Repair or replacement of covered systems and appliances that wear out | Damage from covered events, such as a fire or storm |
Required by your lender? | No | Typically, yes |
Who Regulates Home Warranties in Texas
Oversight of residential service companies moved from the Texas Real Estate Commission (TREC) to TDLR on September 1, 2021. Today, these companies are licensed through TDLR's Service Contract Providers program.
Texas law says a person may not issue a residential service contract unless they are licensed as a residential service company, with limited exceptions.
Tip: Some older articles online still say TREC regulates home warranties. That changed in 2021, so if you need to check a license or file a complaint, go to TDLR.
What to Read Before You Sign
Texas law requires a residential service contract to describe:
- What is covered and what is excluded
- How to make a claim
- Any deductible or service fee
Read these sections carefully. They tell you what you are really buying.
Questions to Ask
- What is the service fee for each claim?
- Are there dollar limits on repairs or replacements?
- Are pre-existing conditions excluded?
- How quickly will a technician be sent?
- Can you renew the contract after the first year?
Should You Get One?
It depends on the age and condition of the home's systems and appliances, and on how much you could comfortably pay for a surprise repair. Your home inspection report can help you decide. (See Your Home Inspection Report, Decoded.)
A home warranty can also come up during negotiations, so talk to your agent about whether it makes sense to include one in your offer or listing.
This post is general information. Coverage varies by company and contract, so always read the contract before you buy.
Frequently Asked Questions
Who regulates home warranty companies in Texas? The Texas Department of Licensing and Regulation (TDLR). Oversight moved from the Texas Real Estate Commission to TDLR on September 1, 2021.
What is a residential service contract? It is the legal term in Texas for a home warranty. It generally covers repair or replacement of covered systems and appliances due to normal wear and tear.
Is a home warranty the same as homeowners insurance? No. Insurance covers damage from covered events. A home warranty covers repair or replacement of covered items that wear out. Lenders typically require homeowners insurance, not a home warranty.
What should I look for in a home warranty contract? Texas law requires the contract to describe covered and excluded items, how to make a claim, and any deductible or service fee. Read those sections carefully.
Protect Your Investment
Whether you are buying or selling, Ryan Adams and The Adams Group TX can help you decide whether a home warranty makes sense for your situation. Call us at (832) 308-7633 or visit us at 5822 Sienna Parkway, Suite 500, Missouri City, TX 77459.
