Effective July 1, 2006, the State Corporation Commission’s (SCC) Bureau of Insurance in Virginia will have the authority to license entities as home service contract providers.
A new law adopted by the 2006 General Assembly (House Bill 383) established a regulatory framework for providers of home service contracts which includes licensure. These providers will be able to issue home service contracts that are similar to home protection insurance contracts, which are currently regulated by the SCC.
Both types of contracts are designed to offer consumers some financial protection against certain unforeseen home and appliance repairs and maintenance expenses that may not be covered under standard homeowners insurance policies. These may include failure of a home appliance or major system (such as electrical, plumbing, heating or air conditioning) due to normal wear and tear or mechanical breakdown. In the case of home protection insurance contracts, coverage may also include structural components of a residential dwelling such as roof, foundation, basement, walls, ceiling, or floors.
The SCC’s Bureau of Insurance advises consumers that there are important differences between home protection insurance contracts it currently regulates and home service contracts that become regulated on July 1. Although some features appear to be similar, home service contracts are not insurance.
The following table reflects some of the major differences between the two types of contracts:
Home Protection Insurance Contracts are insurance contracts:
Coverage may include: structural components, parts, appliances, and systems. Structural components include: roof, foundation, basement, walls, ceiling, or floors.
An insurance agent license is required for persons selling home protection insurance contracts, except for licensed real estate agents, home builders, or home builders’ agents.
Contract forms and rates are required to be filed with and approved by the Bureau of Insurance.
Home Service Contracts Are NOT insurance contracts:
Do not have deductibles. May have a provider fee instead.
Coverage may include: components, parts, appliances, and systems. Structural components are NOT included.
An insurance agent license is NOT required for persons selling home service contracts.
Contract forms and rates are NOT required to be filed with and approved by the Bureau of Insurance.
The SCC’s Bureau of Insurance encourages Virginians to talk to different providers to compare prices and coverage before purchasing a home service contract. A list of licensed providers (after July 1, 2006) or licensed home protection companies (these companies issue home protection insurance contracts), can be found on the Bureau’s website at http://www.scc.virginia.gov/division/boi/webpages/boicompanyinfo.htm.
Source: Virginia Bureau of Insurance
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