Last reviewed: 3 October 2026
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United StatesHow to confirm funded-claims backing: Florida and Texas examples
Some states make a warranty or service contract company show it can pay claims. We call this funded-claims backing. That is our plain label, not a legal term. This page shows what Florida and Texas require and what you can ask to see. Other states differ. It is general information, not advice, and it does not say whether any company is sound.
The short answer
- Florida, vehicle service agreement companies: section 634.041 sets two routes. One is an unearned premium reserve of at least 50 percent of the unearned gross written premium on each service agreement. The other is contractual liability insurance covering 100 percent of the claim exposure.1
- Florida, home warranty associations: section 634.3077 requires a funded reserve of at least 25 percent of the gross written premiums received from contracts in force in the state. An association is not required to set up that reserve if it has contractual liability insurance covering 100 percent of its claim exposure.2
- Texas, service contract providers: the Texas Department of Licensing and Regulation (TDLR) says a provider must submit proof of one of three forms of financial security: a reimbursement insurance policy, a funded reserve account with a security deposit and audited financial statements, or net worth of at least $100 million.3
- How to check: ask which route backs your contract. Then look the company up with your state regulator. In Texas, TDLR says you can search its Licensing Database.3
Two words to know
A reserve is money a company must keep set aside for claims. Florida's law calls its version an "unearned premium reserve."1 An insurance route means a policy that pays if the company does not. Florida calls this "contractual liability insurance." Texas calls it a "reimbursement insurance policy."13 Read your own state's wording.
Florida: vehicle service agreement companies (section 634.041)
Florida's definitions say a "motor vehicle service agreement" is a contract that indemnifies the holder against loss caused by the failure of a mechanical or other component part of a motor vehicle. A "service agreement company" is a corporation, sole proprietorship or partnership, other than an authorized insurer, that issues them.4 Section 634.041 lists what such a company must meet to qualify for and hold a license.1
| Topic | What the statute says |
|---|---|
| Reserve route | An unearned premium reserve of unencumbered assets equal to at least 50 percent of the unearned gross written premium on each service agreement, amortized pro rata over the agreement's duration. A company using the reserve must also deposit securities with the department equal to 15 percent of the unearned premium reserve.1 |
| Insurance route | Contractual liability insurance covering 100 percent of the claim exposure, from an insurer approved by the office that holds a certificate of authority, or from an authorized risk retention group, with a surplus as regards policyholders of at least $15 million. If the company does not meet its obligations, the policy "binds its issuer to pay or cause to be paid to the service agreement holder all legitimate claims and cancellation refunds."1 |
| If the policy ends | The policy may not be canceled, terminated or nonrenewed unless the insurer gives the office a 90-day written notice before that date.1 |
| Using both routes | A company may not use both at once, with one exception: a company with at least $10 million in net assets that files audited financial statements each year may use either route for specific blocks of new agreements, meaning those sold by a single designated licensed salesperson. Otherwise it may keep insurance on agreements sold earlier and use the reserve for new ones, or the reverse. It "must be able to distinguish how each individual service agreement is covered."1 |
| Minimum net assets | To obtain or maintain a license, a company must have minimum net assets of $500,000, with a limited phase-in for some smaller companies. Assets used to meet the minimum must be kept in the United States.1 |
Florida: home warranty associations (section 634.3077)
Florida's definition of a "home warranty" is a contract to indemnify the holder against the cost of repair or replacement of any structural component or appliance of a home, or to furnish the repair or replacement, when wear and tear or an inherent defect makes it necessary (the definition adds other conditions).5 Section 634.3077 sets the financial requirements for an association licensed to sell them.2
| Topic | What the statute says |
|---|---|
| Reserve route | A funded, unearned premium reserve account of unencumbered assets equal to at least 25 percent of the gross written premiums received from all warranty contracts in force in Florida. It must be a separate auditable account.2 |
| Net assets and a larger reserve | The statute also sets a net assets rule of one-sixth of written premiums in force. Net assets may be lower if the association has at least $500,000 in net assets and keeps a reserve of at least 40 percent.2 |
| Insurance route | No reserve is required if the association has contractual liability insurance that shows, to the satisfaction of the office, that 100 percent of its claim exposure is covered. The insurer must hold a certificate of authority in Florida or be approved by the office as financially capable.2 |
| What the policy must say | If the association is unable to fulfill its obligation, "including insolvency, bankruptcy, or dissolution," the insurer will pay losses and unearned premiums "directly to persons making claims." The insurer must assume full responsibility for administering claims. The policy must insure all contracts issued while it was in effect, "regardless of whether the premium has been remitted."2 |
| If the policy ends | The policy may not be canceled or not renewed unless the insurer gives the office 60 days' written notice before that date.2 |
| Net worth route | An association need not set up a reserve or hold insurance if it, or its parent corporation, keeps a net worth of at least $100 million and provides the office with the financial statements and filings the subsection lists. If a parent's net worth is used, the parent must guarantee the association's obligations on a form the office approved, and the association must keep net assets of at least $750,000.2 |
Do not compare the percentages across the two Florida tables. Each is measured against a different base. One uses the "unearned gross written premium." The other uses "gross written premiums received" on contracts in force. That comparison note is ours.12
Texas: service contract providers (TDLR)
In Texas, the provider is "the person, company or entity that is contractually obligated to the service contract purchaser under terms of the contract."3 TDLR says a provider must submit proof of one of three forms of financial security, and that any form "must be approved by the Department prior to use."3
| Form | What TDLR says |
|---|---|
| Reimbursement insurance policy | The policy must include the Service Contract Provider Texas Endorsement and a copy of the approval letter from the Texas Department of Insurance for using it. It must cover all obligations for all service contracts issued and outstanding in Texas.3 |
| Funded reserve account | Three parts. (1) An account of not less than 40% of the gross consideration received from consumers for contracts issued and outstanding in Texas, minus any claims paid. It is kept separate from operating accounts and identified as the "Texas Service Contracts Funded Reserve Account." (2) A $250,000 security deposit. (3) Financial statements audited by an independent certified public accountant.3 |
| Net worth of $100 million | A copy of the provider's or its parent company's most recent Form 10-K or Form 20-F filed with the SEC, or audited financial statements showing a net worth of at least $100 million.3 |
TDLR says the provider must keep the financial security "as long as the provider does business or is registered in Texas and until the provider satisfied all liabilities and obligations to its service contract holders in Texas."3 TDLR also says a motor vehicle dealer that sells its own contracts only on vehicles it sells, is licensed under Occupations Code chapter 2301 and covers its obligations with reimbursement insurance does not have to register with TDLR.3
How to check, step by step
- Find who is obligated. Look in your contract for the company that must pay claims. That may not be the seller. Texas separates a provider, an administrator and a seller.3
- Ask which route backs your contract. Ask in writing: a reserve, insurance or something else? Florida's statute says a company must be able to tell how each agreement is covered.1 Keep the answer with your contract. That last step is our suggestion.
- If it is insurance, get the insurer's name. Texas says you can search the Texas Department of Insurance website to find out whether a specific insurance company is authorized to write this type of liability insurance in Texas.3 Florida also sets requirements for the insurer. For vehicle service agreement companies, it must be approved by the office and hold a certificate of authority, or be an authorized risk retention group. For home warranty associations, it must hold a certificate of authority or be approved by the office as financially capable.12
- Look the company up with the regulator. In Texas, search the TDLR Licensing Database and select "Service Contract Providers" as the license type. Providers and administrators are in one list, and an administrator's number has "(a)" in it.3 In Florida, the statutes above send notices and filings to "the office." Florida's Insurance Code defines "office" as the Office of Insurance Regulation of the Financial Services Commission.6
- Check for enforcement actions. TDLR says you can search its website for a list of final enforcement actions against providers and administrators, again selecting "Service Contract Providers" as the license type.3
- Ask the regulator what it can confirm. TDLR says each form of security must be approved before use.3 The sources we used do not say what each regulator will tell the public about a particular provider's filing, so ask.
Where this fits our standard
Point 4 of our standard asks whether a funded-claims mechanism is verified where a state requires one. The Register reports how we check providers in the category "warranty and service contract providers." It describes a method, not a verdict on any company.
How to verify this yourself
- Open the Florida Senate pages for sections 634.041 and 634.3077 (references 1 and 2). Every Florida figure above comes from them.12
- Open the TDLR page (reference 3). Every Texas statement comes from it. It points to Occupations Code section 1304.151 and Rule 77.40 for the financial security rules, so read those for the full text.3
- For another state, find its statute or regulator page and look for the words "reserve," "reimbursement insurance," "contractual liability" or "net worth."
What this page is not
This is general information, not legal or financial advice. It covers two Florida statutes and one Texas regulator page only. It does not rate any insurer, reserve or company, and it does not say whether a given company can pay claims today. Statutes change. The Florida text is the 2025 edition. The Texas source is the regulator's FAQ page, not the statute itself.
What to do next
Before you pay, ask which route backs the contract and look the company up with your state regulator. Then read how to verify a home warranty company, reimbursement insurance vs. a funded reserve and what happens if a warranty company goes out of business. Start from the state regulation hub to find your state.