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What is a home warranty plan?  In the Unites States, a home warranty is a service contract to repair and maintain various systems found in your home.  It can include appliances and important home mechanicals such as heating and cooling, electrical and plumbing.  Contracts are usually renewed on a yearly basis.

As a landlord, home warranty plans have their advantages.  When something breaks down, you no longer have to worry about finding and scheduling a repairman, electrician or plumber.  One call to your home warranty company, and they take care of it for you.  Home warranties can also be an easy way to avoid surprise expenses.  You need to budget for the annual premium and set some money aside for service calls, but major repairs will be covered.  Home warranties can be customized to suit your needs.  Landlords who choose to buy home warranties often do so for peace of mind and easy budgeting of home repair costs.

Home warranty plans do have some disadvantages.  Like an insurance policy, you pay for the plan whether you use it or not.  Policies cost at least a few hundred dollars per year, meaning it could be more cost efficient to pay-as-you-go for appliance repairs or replacements.  Another common complaint is that claims can be denied.  Home warranty companies can refuse to cover the cost of a repair if they deem there was neglect, improper maintenance or faulty installation.  If a tenant breaks an appliance due to carelessness, for example, the cost may not be covered.

If you are considering a plan, here are our top seven tips for buying a home warranty for a rental. 

1. Know What Is Covered

Not all home warranties are the same.  Each will have their own list of inclusions, limitations and exclusions.  Some contracts, for example, do not cover washing machines and clothes dryers, even when opting for appliance coverage.  Most policies won’t cover outdoor repairs, garage door openers, permit fees or the disposal fee for old appliances.  Take the time to read the fine print and fully understand what is covered… and what isn’t.

2. Have Proper Coverage for Each Rental Property

You will need to purchase a home warranty policy for each property you wish to have covered.  You can choose various degrees of coverage.  Many landlords buy policies that cover their rental property’s major systems (electrical, plumbing and HVAC).  Others prefer to also include appliances such as refrigerators, stoves and dishwashers.  It’s up to you to decide which coverage makes the most sense for your specific situation.

rental property home warranty3. Price

 When purchasing a home warranty, there is an annual cost which can range from $300 to $600 or more, depending on the package and coverage you choose.  Be aware you will also be charged a fee for every service call.  These fees can cost from $30 to $125 depending on the company and nature of the repair.  Ask for a breakdown of all possible costs before signing up.

4. Shop Around

Take the time to get a few quotes before choosing your home warranty plan.  But don’t forget that price isn’t everything; as grandparents the world over say, “you get what you pay for”.  Using a great, reliable company can save you many headaches down the road.  Ask friends, family and other landlords for recommendations.

5. Calculate Your Break-Even Point

Once you have a few quotes, take the time to calculate your break-even point.  How many appliances could you replace for that amount of money?  Is it likely your property will need enough repairs to make the plan worthwhile?  Does is make sense financially to purchase a warranty plan?  Buying a home warranty is a decision that should be done based on facts, not fear.

6. Consider Home Warranties When Buying Property

Some landlords choose to buy a one-year home warranty when buying a new income property.  They then don’t have to worry about any major expenses during those first few months of ownership.  It also helps keep the budget more predictable.  Once they have a better feel for the condition of all appliances and systems, they can decide if they wish to continue their coverage.

7. Remember to Deduct the Cost When Filing Tax Returns

As a landlord, the cost of a home warranty on a rental property is tax deductible.  Both the annual premium and any service fees are considered operating expenses and can be claimed to reduce your income taxes.  Don’t forget to save your receipts!

Landlords, do you buy a home warranty for your rentals?  Have they saved you money and given you peace of mind? 


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