Ask two people about home warranties and you’ll get two different answers. Some view a home warranty as a savings account savior, helping them pay for expensive, needed repairs when things in their home begin to break down. Others will say that home warranties are outright scams, failing to cover even the most basic fixes.
But what about a rental property home warranty? Does it make more sense to get this coverage when you’re expecting the wear and tear of a tenant on your property? Or, is this just another way to throw cash down the drain?
Fret not, we’ve got the benefits, drawbacks, and best rental property home warranties coming up in this article!
What is A Rental Property Home Warranty?
A rental property home warranty is an insurance policy that covers the homeowner in case of malfunction, breakdown, or repair for their residence. It comes with a few different types of coverage, such as normal wear and tear, appliances, plumbing, and electrical wiring. This allows landlords to have a bit more peace of mind when a repair pops up, knowing that they don’t have to shell out the entire maintenance cost by themselves.
Should Landlords Get a Home Warranty on Their Rental?
So, is a home warranty a worthwhile purchase to make, or is it lackluster coverage that will rarely pay itself back? Here are the pros and cons:
Benefits of Home Warranties on Rentals
- Tax Deductible: One of the most important benefits of a home warranty is that it’s tax deductible. Landlords can deduct the cost of their insurance from their taxes, which helps offset some of the premium costs.
- Easier to Budget for Repairs: It can be difficult to budget for repairs because they pop up so quickly. With a home warranty, landlords can see what their coverages are and set aside money in case there’s an emergency repair that needs to be done.
- Access to Contractor Network: A home warranty gives landlords access to a network of contractors, who can help them with any repairs. This is especially important for landlords who don’t have much experience in home repair or maintenance or out-of-state landlords who have yet to find trusted contractors.
Drawbacks of Rental Property Home Warranties
- Premiums Must Be Paid Even if There are No Repairs: Rental property home warranties come with a monthly premium, which must be paid even if there are no repairs. This can add up over time and become a money suck if the property, and its appliances, are already in great condition.
- Repairs Costs Can Be Capped: Rental property home warranties have a cap on their coverage. This means that the policy is only valid up to a certain amount of money, which can vary depending on the plan you choose. If your appliances need repairs but are above this dollar amount, then you’ll have to pay out-of-pocket for the excess cost.
- Repair Claims Can Be Denied: Rental property home warranties have the right to deny a claim. This may be because they don’t cover certain appliances, or because they deem your claim to be invalid. If this happens, then you will have to pay for the repairs yourself.
How to Pick the Right Rental Property Home Warranty
Home warranties, for the most part, will only make sense on certain properties. If your property is a new construction, with brand new appliances, in an A-Class neighborhood, with A-Class tenants, a home warranty may not be useful. But, if you’re renting out an older home, with signs of some repairs being needed over the next few years, a home warranty may be worth the price.
Once you know whether or not you need a home warranty, it’s time to call different companies and get quotes. You don’t want to over-insure yourself with an expensive home warranty you’ll never use, so remember to ask for coverage that fits YOUR situation.
Now that you’ve got multiple options to choose from, you should sift through warranties by price, coverage, added fees, and dollar caps. Remember to ALWAYS search through customer reviews, as the actual customers will be a good pulse check on whether or not this home warranty will pay out in case of a repair.
4 Best Home Warranties for Rental Properties
You’ve decided you want a home warranty for your rental, but don’t know where to start or who to call. These four companies are some of the most popular, most-respected home warranty providers for landlords:
- American Home Shield
- Choice Home Warranty
- Select Home Warranty
- Liberty Home Guard
Let’s dive into the pros, cons, and pricing of each.
1. American Home Shield
American Home Shield is a well-known and highly-rated home warranty provider. They offer plans for both single-family homes and rental properties and have a long-proven track record.
Pros:
- Customizable plan and pricing to fit your specific needs
- Highly reviewed customer service
- Long track record with 50+ years in the home warranty business
- Offers discounts for HVAC preventative/routine maintenance
Cons:
- Costly price which can rival the cost of home insurance itself
- Roof leakage coverage doesn’t come standard (sorry Floridians!)
- Not suited for low-end appliances, outdated systems, or very old rentals
Monthly Cost
At $40 – $70 per month, depending on your preferred coverage, American Home Shield can double your cost of rental insurance, but it may be worth it on problem properties.
Best For: Landlords who want customizable coverage for their troublesome rental properties.
2. Choice Home Warranty
Choice Home Warranty is a national company that offers home warranties for rental properties. It covers appliances, plumbing, heating, and cooling systems, as well as electrical problems like outlets or wiring.
Pros:
- Comprehensive plan options that cover a range of wear-and-tear-caused repairs
- Reasonable pricing that won’t take away too much of your cash flow
- Generous cancellation policy with a 30-day guarantee
Cons:
- Not as customizable as other rental property home warranties
- Does not allow landlords to choose their contractors
- AC maintenance is not covered
Monthly Cost:
At $36 – $44 per month, Choice Home Warranty offers reasonable prices with a fair amount of coverage.
Best For: Landlords who want comprehensive coverage, but don’t want to dip into their cash flow too much.
3. Select Home Warranty
Select Home Warranty is a nationwide home warranty provider that offers comprehensive coverage at a reasonable price. They have been in business for over 10 years and have serviced tens of thousands of homes.
Pros:
- Comprehensive plan options with reasonable prices
- Highly rated customer service
- $3,000 coverage gap for HVAC work
Cons:
- Low coverage gaps for non-HVAC types of rental property repairs/maintenance
- Service fees can add up if you require multiple different repairs during one visit
- Not the best coverage for those with high-end appliances
Monthly Cost
At $36 – $50 per month, Select Home Warranty’s price comes very close to rivaling Choice Home Warranty.
Best For: Landlords looking for affordable coverage and homeowners that do not have expensive (new) systems and appliances in their rentals.
4. Liberty Home Guard
Liberty Home Guard is a warranty provider that offers warranties for almost every type of system you can think of. They have plans for furnaces, air conditioners, heating and cooling systems, and more.
Pros:
- A- rating with the BBB (Better Business Bureau)
- Quick response times for repairs and highly-rated customer service
- Flexible coverage with customizable add-ons for your specific property
Cons:
- Like many home warranties, you cannot choose your service provider or contractor
- Cancellation fees can add up if you end up not needing a repair
- Expensive, especially if you go with the comprehensive option
Monthly Cost
At $40 – $60 per month, Liberty Home Guard is not a terribly cheap option for new landlords.
Best For: Landlords looking for great customer service and fast repair times.
Rental Property Home Warranties Can Save Time and Money
Is a home warranty worth it? It’s up to you! But nothing is worse than buying a rental property, only for major systems and appliances to poop out on you months into renting. So, for those landlords that don’t have a large safety reserve, or those just trying to be extra cautious, a rental property home warranty can be worth its weight in gold!
As always, we encourage you to do your own research before making any decisions about a rental property home warranty, as well as check out our other articles on rental property management.
Rental Property Home Warranty FAQs
Still don’t know if a home warranty’s coverage is worth the cost? These commonly asked questions should help you with your decision:
The short answer is yes. A rental property home warranty can be an incredibly useful tool for landlords. It provides coverage for repairs and maintenance issues that may come up, so you don’t have to worry about being stuck with a huge bill if something goes wrong.
Home warranties can be expensive and difficult to understand. They also don’t cover everything that could go wrong with your rental property, so it’s important to read the fine print carefully before signing up for one.
Yes, if used for a rental property, then the cost of your home warranty will be tax deductible. Why? Because it’s a business expense!
Home warranties are not cheap. You should consider how much you can afford to pay for a home warranty and whether or not it’s worth the extra cost. If you plan on owning the property for an extended period of time, then a home warranty may be worth it—but if you’re planning on selling soon, then it might be better to pass on the expense and take your chances with whatever issues arise during that time frame.
