Yes, Home Warranty insurance plans can be offered to rental property owners who want “peace of mind” assurance that if major system components or other crucial features of their property fail, there will always be someone on-call to fix it or replace it. 

A typical home warranty plan covers the most important systems in any house: the plumbing, electrical wiring, heating and air-conditioning, along with major household appliances such as dishwasher, dryer and sometimes ranges and refrigerators. Some policies charge extra for coverage on specific items. 

Proponents and underwriters of home warranty plans say they can be highly cost-effective. For instance, a new heating or cooling system can cost you upwards of $10,000 without a warranty plan. Whereas with a home warranty in place, your true cost may only be the value of the annual premium plus service call fee ($450 – $600.) 

Consumers who purchase home warranties do need to be aware of certain important plan restrictions such as: 

• What does the warranty actually cover vs. what is specifically excluded? For example, a leak at a kitchen P-trap may be covered but a broken kitchen faucet may not.
• “Pre-existing conditions.” Most warranty plans won’t cover repairs to systems that were defective – at least in the warranty company’s opinion – before the policy went into effect.
• What are the options available to you regarding annual premiums and service charges per visit?
• The fine print of annual contracts for limitations on what the warranty company will do – or pay for—regarding its repairs. For example, some plans say they will not restore sheetrock to “finished” condition. Others exempt specific products – icemakers, freezers, and hot tubs among others. Others may not cover code upgrades without additional expense or a different type of policy.

So the bottom line, when it comes to handling repairs on your rental property, is that you have two options. You can either “self-insure” or have a “home warranty.” Pros and cons for these two options may be as follows:

Self-insure:

• Pro- money is only spent if and when there is a repair
• Con – 100% of the cost of the repair comes out of your pocket or operating account

Home Warranty:

• Pro/Con – you pay an annual service policy amount just like an insurance policy (e.g.- $465.00)
• Pro – for covered repairs your only cost is generally a service call fee (e.g. – $65.00)
• Pro – home warranty companies generally have 24/7 call centers to place claims
• Con – you often have no choice in the actual vendor that is sent to a property to do the repair
• Con – some home warranty companies do not easily work with the property management company who is acting as the agent of the rental property owner

Note: The information above is the opinion of First Realty / Pryor & Associates, which does not receive any remuneration from any Home Warranty companies.