And considering the law of averages, owning multiple properties increases your chances of needing to repair or replace an expensive appliance, especially if tenants are using those appliances regularly.
Buying a home warranty for a rental property is one way to better manage your maintenance responsibilities and protect yourself financially when an appliance or home system component needs to be repaired or replaced.
What Is a Home Warranty?
The term “warranty” is something of a misnomer. More precisely, a home warranty is a service contract with a third-party provider. It allows a property owner to service, fix, and replace equipment around the home at an affordable cost. It’s most common for a homeowner to purchase a warranty for a primary residence, but warranty providers also offer home warranties for rental properties.
Home warranties can cover kitchen appliances, laundry machines, water heaters, plumbing, electrical systems, HVAC—virtually anything within a home. With an active policy, a homeowner can submit a claim when a covered appliance or system requires service or develops a problem due to normal wear and tear. The warranty provider will send a licensed and insured technician to resolve the issue. It’s as easy as that.
There are 2 main costs associated with a typical home warranty: a premium and a service fee. The premium is a set expense that the policyholder pays each month or year, just as one would for an insurance policy. While prices vary by company and extent of coverage, the average premium is between $300 and $600 per year. The service fee is a one-time payment whenever the policyholder submits a claim. The average service fee is in the $75 to $150 range.
Benefits of a Rental Property Home Warranty
The primary benefit of a home warranty for a rental property is savings. If a refrigerator in a rental unit suddenly ceases to function, the property owner is protected from having to pay for a technician to install a new $400 compressor. Across multiple units, those appliance repair costs add up quickly. A home warranty simplifies a property owner’s budget and ensures lower expenses over time.
Another important benefit, however, is convenience. Because home warranty providers maintain networks of professional technicians, the property owner is spared the responsibility of hiring a repairperson or personally servicing a piece of equipment. Warranty providers also often provide resources to make it easier to keep track of service and maintenance schedules.
Things to Consider Before Buying a Home Warranty
Property owners have many options when it comes to purchasing a home warranty. There are several companies in the home warranty space, and plans can vary significantly. There are some important things to bear in mind as you shop for the best plan.
- Evaluate your needs. Take stock of the appliances and systems in your properties. Don’t purchase coverage you don’t need. If your rental properties don’t have in-unit washers and dryers, it may not make sense to purchase a bundled appliance plan that includes coverage for those machines. Make a list of the equipment you do own and have it ready when you start reaching out to home warranty providers.
- Check for existing warranties. Some of your appliances may already have warranty coverage. Major appliances typically have manufacturers’ warranties that cover the entire appliance for 1 year and select parts for longer. Confirm that these warranties have expired to avoid redundant coverage.
- Consider all the costs. Sometimes the most affordable home warranty isn’t the one with the cheapest monthly or yearly premium. You’ll want to also consider the service fee, add-on costs, and coverage limits. Some home warranty plans offering low rates may prove to be significantly more expensive when you factor in the less obvious costs.
- Do your research. Some home warranty providers are more reliable than others. Find impartial reviews from consumers or respected institutions to gauge the quality of the companies you’re interested in. Check that companies are licensed to operate in your state and that they haven’t been accused of unethical or illegal practices.
The Bottom Line
For most owners of multiple properties, home warranties are wise investments. They can simplify your life, provide substantial financial protection, and offer welcome peace of mind. But everyone’s circumstances are different. It’s up to you to do your research and find the policy that’s best for you and your properties. If you take appropriate care, a home warranty can end up paying for itself in a surprisingly short amount of time.