A letter warning homeowners they "may be responsible" for repairs "not covered by standard homeowners' insurance" and could have to "pay an expensive bill" is appearing in mailboxes around the Valley.
Let ABC15 Know viewer Rusty shared his story with us after receiving a letter offering service line warranties. Those warranties cover water and sewer lines that run from your valves to the house. Those are the homeowners' responsibility while the city or utility is responsible for the lines in the street.
When these letters show up in consumers' mailboxes, they can be confusing. The letters often have a city or municipality logo on them, making them appear like they might be sent from the local government or mandatory.
The insurance offers are optional.
Several Valley cities - including Phoenix, Scottsdale, and Mesa - all partner with the same company, Service Line Warranties of America (SLWA), for their service line protection programs.
We asked the cities and learned they generate revenue through the partnerships in various ways - some through license and royalty fees, while other contracts give the city a percentage cut of what each consumer pays in coverage plan fees.
Here's a closer look at the numbers:
In 2023, Mesa received $141,316.45 in total fees through their partnership with SLWA. Scottsdale received $9,246.68 through their partnership, however, that contract began in 2023 so the revenue only accounts for a short period of time.
Phoenix did not break down the numbers by year when asked, but city records state the program brought in $3 million in revenue for the city since it began in 2012 through the beginning of 2023.
While some cities allocate the revenue to their general fund, others tell us revenue from the service line protection programs is allocated solely for residential utility bill assistance and other residential assistance programs.
So, how many residents use the program, and is it beneficial? The Let ABC15 Know team reached out to Service Line Warranties of America.
The company tells us at the end of 2023 Phoenix had 21,700 participating homeowners, while Scottsdale had 3,140, and Mesa had 9,400.
Last year, 1,806 Phoenix residents called for service, 119 Scottsdale residents, and 444 Mesa residents. Of those claims, SLWA says 1,602 Phoenix, 100 Scottsdale, and 388 Mesa residents had their claims serviced or completed under the program.
In an email, a spokesperson for SLWA wrote: "Our plans provide a safety net for homeowners that don't have readily available cash on hand or don't want to deal with the hassle of finding a reputable contractor to do the work in an emergency."
Homeowners receiving a letter like this may have questions when they see the city or municipality logo.
Remember — while, yes, cities and municipalities do receive something from these partnerships, the programs are optional. Like Rusty, who first brought his letter to our team, you may feel the insurance offer isn't necessary for you.
Before signing up for a water-sewer service warranty, try these tips:
- Check your odds. Consumers' Checkbook, a nonprofit consumer advocacy organization, reviewed warranty plans and found typical costs for coverage range from $4 to $13 per month. However the review found claims for catastrophic restoration and repair are rare, making coverage potentially unnecessary. You can read the report and more on the cost of claims, here.
- Consider the age of your home. If your home was built decades ago, underground service lines could be made of older materials and be more susceptible to wear and tear and leaks.
- Ask your insurer about service line options. Your insurer may offer an endorsement or add on to your standard policy to include service line coverage.
