service america

In business, some companies are so old that they seem invincible. Sears, Kodak, Toys R’ Us – their former dominance made their inevitable fall unthinkable. And yet, as of 2019, all three companies have fallen. Taken down by market forces, they are no longer a part of the consumer landscape.

In 2018, the home warranty industry lost one of its own in the same fashion. After 43 years in business, Service America, a company serving many Illinois based customers, has announced that it was closing its doors for good, leaving tens of thousands of subscribers in the lurch, as reported by the industry magazine Review Home Warranties.

What caused Service America to fail? How can you minimize your risk when shopping for a home warranty provider? We’ll answer these questions and others in today’s blog.

What happened to Service America?

A product of a merger between Encore Service Systems and Amira Services, Service America was once a vibrant company. Back in 1993, they covered more than 200,000 households, employing more than 375 people.

Things got tough as time went on, though – from December 2000 to December 2003, revenue declined from $74.2 million to $48.1 million – a decline of almost 40%. In 2004, parent company Chemed offloaded Service America to an employee-formed ownership group, who then sold the firm to FirstService Corporation, a Canadian-owned real estate services company, two years later.

Service America managed to limp along until November of 2018 – that month, they announced they would wind down operations, leaving 23,000 customers without home warranty coverage.

What happened? There are two theories – either encroaching competition ate away at their market share, or the service provided by this company steadily declined over time, guaranteeing its eventual downfall.

Which is true? In all likelihood, its a combination of both. A generation ago, they enjoyed a dominant position in the home warranty market – if you wanted a policy that would protect your home systems and appliances, they were one of the few choices you had.

They got complacent over time, leaving them ripe for disruption. As more prominent players like American Home Shield and Home Warranty of America moved in, their lower price points, better selection, and experienced sales staff took Service America by surprise.

As revenues plunged, their ability to serve their customers shrank as well. By the late 2000s and early 2010s, review sites were ubiquitous, allowing consumers to share their experiences with various companies.

All of a sudden, Service America’s worsening customer service was on display for all Floridians to see. Not only were they losing customers to the competition, but one damaging review after another severely hampered their ability to secure new clients.

What will happen to Service America’s remaining subscribers? According to the news release announcing their impending closure, they committed to refunding customer money, but as of January 2019, it is reported that hundreds of households are still waiting to receive reimbursement.

Home warranty companies are loosely regulated

Despite grossing more than $2 billion in revenue in 2018, few laws exist to rein in the home warranty industry. None exist federally, and regulation varies significantly at the state level. For instance, these companies are overseen by the Office of Insurance Regulation in Florida, while other states (e.g. Delaware) have no laws whatsoever governing the behavior of home warranty companies.

It’s a different story for companies that provide homeowner’s insurance. They are required to adhere to rules and regulations set out by state regulators. On top of this, the federal government has an oversight body called the Federal Insurance Office that identifies gaps in the state systems.

Why aren’t home warranty companies more strictly regulated? Much of it has to do with the clout that the National Association of Insurance Commissioners (NAIC) has with lawmakers. While the edicts they make are not legally binding, state lawmakers routinely use them to draft policy.

According to a 1995 NAIC ruling, service contracts offered by home warranty companies failed to meet their definition as an insurance product. Since that ruling, 13 states have passed laws that exclude home warranty contracts from the same scrutiny applied to insurance products.

A long list of disgruntled reviews dog many home warranty companies

For every business that plays by the rules, there are others who cut every corner possible in the pursuit of profit. In a lax regulatory environment like the home warranty industry, this sort of behavior is sadly common.

They had gotten away with denying claims arbitrarily, employing technicians that routinely perform substandard work, and providing poor customer service for years. However, as we moved into the 2000s and beyond, these practices were exposed for all to see.

You’d think this would convince leading players to clean up their act. However, given the Trustpilot ratings for companies like American Home Shield (1.6/10) and Sears Home Services (4.1/10), it is apparent some firms are too entrenched to care.

A quick scroll through review threads for these companies is enough to make anyone reconsider getting a home warranty. Take American Home Shield for instance – while other companies have a mix of good and bad reviews, their Trustpilot page has long streaks of terrifying stories by clients.

Customers spending more than an hour on hold, service charges being levied despite the repairperson not showing up, furnace claims being denied in the middle of winter over burned out wires – these are just a few of many complaints levied against this corporate giant.

Can home warranty providers be trusted?

Given the evidence cited above, is it wise to sign a contract with any home warranty provider? The answer depends a great deal on where you live – if you find a trustworthy provider, signing a contract is still a wise investment.

Here’s why: a majority of people in this country live from paycheck to paycheck. More than half of us can’t afford a $400 emergency without going into debt. If your air conditioner quits on a 90-degree day, or if your furnace dies in the middle of a polar vortex, could you afford the multi-thousand dollars repair bill?

A home warranty eliminates these budget-busting expenses and replaces them with a predictable premium. From $20-$50 per month or $200-600 per year, you are only a call away from having any issue fixed.

How to protect yourself when shopping for a home warranty

So, how can the average person find a home warranty provider that won’t rip them off? After identifying the top companies in your area, compare and contrast them using online resources. While Sears Home Services and American Home Shield score poorly, other providers (like Choice Home Warranty) have decent ratings.

In particular, review sites are excellent resources, as they condense data and break it down in an easy-to-read format. From covered systems/appliances to more detailed plan breakdowns, they make researching companies a much easier task. covers this topic extensively, as they offer all the infographics, tables, and in-depth analysis you’ll need to make an informed decision.

Finally, read the fine print of any contract before signing it. Burrowed within the terms and conditions are exclusions that can make the deal unsignable. For instance, a home warranty contract may cover refrigerator repairs, but not to the ice maker. The presence of ‘preexisting’ conditions may deny you coverage. If the cost of repairs exceeds the defined cap, you’ll have to pay the difference.

By going through a home warranty contract line by line, you’ll avoid signing one with unfair clauses that could leave you with a bad taste in your mouth.

Jake Leonard is the editor-in-chief of Heartland Newsfeed. He is general manager of Heartland Internet Media Networks and an active contributor to four newspapers for Pana News Group. He also serves as chairman of Tri-Counties Libertarian Party and Capital Area Libertarian Party, deputy candidate recruitment director for the Libertarian Party of Illinois and as chairman/co-founder of the Libertarian Party Millennial Caucus.

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