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Should I Get A Home Warranty?

When you are considering the pros and cons of being a landlord or hiring a property management firm, you may also consider purchasing a home warranty to help you with unexpected repairs.

A home warranty is different than a home insurance policy. Typically they are one-year contracts, and the warranty will provide service, repair or replacement of major home systems. Warranties vary, but typically, a home warranty covers the following:

  • Plumbing Systems
  • Electrical Systems
  • Water Heater
  • Heating, Ventilation and Air Conditioning Systems (HVAC)
  • Kitchen Appliances (Built-in Dishwasher, Built-in Microwave, Built-in Compactor, Refrigerator, Stove, Oven, Cooktop, Garbage Disposal)
  • Washer & Dryer
  • Garage Door Opener

You can purchase enhanced home warranties which cover items like pools, hot tubs, and other home amenities.

How Much Do Home Warranties Cost?

Home warranties can cost anywhere from $300 to $800, depending on the number of items and systems covered and the deductibles and exclusions applied. This does not include the $75 to $100 for each service call.

What To Consider Before Buying A Home Warranty

Here, we will take you through the things to consider before purchasing a home warranty so you can make an informed decision as to whether a home warranty is right for you.

What’s Already Covered?

Before purchasing any warranty, be sure to look at the existing warranties on your systems and appliances and see what is already covered.

Covered Items and Their Average Life Span

Many people like the security of a home warranty because it will cover home appliances if they break. Though your appliances may have a few years on them, they may or may not be close to breaking down. This chart from the National Association of Certified Home Inspectors shows the life expectancy of typical home appliances. Use it to gauge where your appliances are in their life cycle.

AppliancesYears
Air Conditioner (window)5 to 7
Compactor (trash)66
Dehumidifier8
Dishwasher9
Disposal (food waste)12
Dryer Vent (plastic)5
Dryer Vent (steel)20
Dryer (clothes)13
Exhaust Fans10
Freezer10 to 20
Gas Oven10 to 18
Hand Dryer10 to 12
Humidifier (portable)8
Microwave Oven9
Range/Oven Hood14
Electric Range13 to 15
Gas Range15 to 17
Refrigerator9 to 13
Swamp Cooler5 to 15
Washing Machine5 to 15
Whole-House Vacuum System20

Go through your property and write down the age of each appliance and compare it to this chart to determine the likelihood that it will need to be replaced in the next year. Bear in mind that the warranty probably won’t cover any item with a pre-existing problem. If your appliances are still well within their working years, you may not need a home warranty. If you have some that are close to the end of their life cycle, read on. There’s more to consider.

Exclusions to Home Warranties

Some home warranties will not cover an appliance if the appliance wasn’t maintained, if it wasn’t installed correctly, or if the appliance had excessive wear and tear. The warranty company determines if the appliance in question has any of these three issues.

It Will Likely Be Repaired Not Replaced

The home warranty company decides whether to repair or replace a broken appliance. You don’t. Even if the appliance breaks multiple times, they will likely keep sending a repair technician and parts rather than replace it.

The Warranty Company Chooses the Service Provider

When a covered item breaks, you can’t call any service provider. You must use the contracted service provider the warranty company authorizes.

The Warranty May or May Not Provide Immediate Service

Your contract may specify a range of time by which they will provide service, and you won’t typically have control over when the repair will be made. So, for example, if the contract says the provider will make a repair within two business days and your tenant reports the air conditioning isn’t working on a Friday, your tenant is going to be sitting in a hot house till Tuesday. If that weekend happens during the hottest week of the year, your tenant can be facing real health concerns. Be sure to read the fine print on when service will be provided.

Not all Warranty Companies Are the Same

Make sure you research the warranty company thoroughly before signing a contract. Check their rating with the Better Business Bureau and see if the company has any complaints against them. Then go to the National Association of Insurance Commissioners and locate your state’s insurance regulators to verify the license and status of the warranty company. (Not all states require home warranty companies to register or be licensed with the state, but 32 states do.) Finally, read reviews from other consumers on the top home warranty companies at ConsumerAffairs.com

A Home Warranty Does Not Guarantee Happy Tenants

The important thing to remember is that as the landlord, your tenant is expecting you to take care of maintenance issues quickly. Failure to do so will make them less likely to renew their lease. Home warranties can be very frustrating to tenants because the companies can be slow to respond, and they can be slow to fix the problem and require multiple visits to the property.

Bear in mind that the home warranty company is not looking at the overall maintenance of your property. They will come back and fix something as many times as they have to, even if replacing it would be less hassle for you and your tenant.

Home warranties can be a great option when you want some financial assistance should something major breaks on your property. However, if you’re looking for a way to provide ongoing maintenance for your property, a home warranty isn’t going to provide the level of service your tenant or your property will likely require. Also, when you consider that the yearly cost of the home warranty and service visits can equal the cost of replacing an appliance every year, home warranties can end up costing you more in the long run.

More Information On Maintaining Your Rental Property

What Maintenance Am I Responsible For as a Landlord?
How To Find A Reliable Contractor