Home Warranty Companies

350 views September 1, 2017 September 25, 2017 Justin Stowe 0

Home warranty companies are great for landlords. Many new landlords don’t realize how useful they can be, which is why we put together this short guide.

What do Home Warranty Companies Do?

A home warranty is a contractual agreement between a landlord and a company that covers repair or replacement costs of the systems and appliances within a home. The company that carries out these policies are known as a home warranty companies and they offer home warranty plans or a home warrant policy. A home warranty is a service contract that provides financial securities for homeowners on listed items that are reported within the term of the contract.

Landlords often have a hard time deciding on whether or not buying a home warranty is a good option. When it comes to how repairs and maintenance of home appliances will be managed, homeowners have to choose between calling a contractor, using DIY fixes or sorting it out through a home warranty company.

The cost of a home warranty is paid upfront and is not determined by how old the home is. The cost is also determined by the type of property.

Home Warranty Companies vs. Home Insurance

It should be noted that a home warranty policy is different from homeowner insurance. While homeowner insurance covers major risks like fire, flood, and property crimes, a home warranty policy only covers damages on specific home components such as: plumbing, heating, and electrical fixtures.

Homeowner insurance is meant to cover the risks on the structure of your home and your possessions. Home warranties are mostly optional, whereas homeowner insurance is required when a homebuyer is securing a mortgage.

How Do Home Warranty Companies Work?

  1.    When a landlord discovers the need for a repair of an appliance or system, he calls the home warranty company to put in a ticket.
  2.    The company confirms if the appliance is covered under the terms and condition of the warranty. If so, a contractor is sent to the home.
  3.    The landlord pays the required service call fee to the contractor, typically and currently in the range of $75 – $125.
  4.    The contractor inspects the appliance, sends the diagnostic report to the company and gets approval for the repairs.
  5.    If the request is approved, the repair will be carried out.
  6.    The contractor that carried out the repair then is fully paid by the home warranty company as long as the cost of repairs is within the limit stipulated in the policy. If not, the landlord may be required to pay the excess, depending on the terms and conditions of the contract.

Pros of Working with Home Warranty Companies

Save Time

All you need is to call the company or simply send an email. You do not have to expend your time searching for a qualified contractor. In addition to this, most home warranty companies are available 24-hours a day, so you don’t have to wait till day-break to sort the issue out.

Peace of Mind

Your mind is at rest knowing you already have the risks covered. With a home warranty, a broken appliance or leaky toilet will not likely result in an additional costly expense.


Almost all home warranty companies offer both basic and total plans (sometimes called an enhanced plan). While the basic plan covers items like electrical, heating and plumbing appliances, the total or enhanced plan covers the repairs for air conditioning systems and appliances like refrigerator and dishwasher. There could also be optional coverage for items such as roof leakages, swimming pool problems, and other faulty external systems.

Incentive to Buyers

If you are considering selling your investment property, you will be at an advantage of selling faster and at a higher price than many homes without a warranty. Buyers have more confidence in a home that has a warranty policy.

Inexpensive Service Calls

No matter the complexity of your repair, companies set their service call at flat rates.

Cons of Home Warranties

Home Warranty Companies Prefer Repairs to Replacements

They try every possible means to repair the item rather than replace it. This is usually cheaper for the company.

Even if they do replace a unit, they probably won’t use the top-of-the-line products.

More Expensive than DIY

Not all repairs covered by the policy can be carried out through a DIY fix. Technical and more specialized repairs will be cheaper through a home warranty than doing it all yourself.

Policy May Not Get Used

Most policies cover repair costs for only one year, after which it has to be renewed. If your home is new, or adequately maintained, your appliances may not develop faults or get damaged within that duration. This may make you feel that the premium paid is a waste.

Pre-existing Conditions

You cannot make a claim on any item that was damaged before the policy started. So a home warranty company is not an option when you are looking for a policy that will repair your previously broken items.

You Can’t Choose your Contractors

Most companies already have pre-selected contractors, and you will have to make do with them. However, in some instances, warranty companies allow their customers to pick their repair service provider as long as the cost does not exceed the limit specified in the policy.

What to Look for in Your Home Warranty Company

There are many things you need to consider when considering a home warranty. Below are some of them.

What services are covered?

The policy usually covers general items like electrical systems, air conditioning, water heater, heating systems, telephone wiring, internal plumbing, water heaters, dishwashers, door bells, and ovens.

The detailed list of what is covered will be explicitly mentioned in the terms of contract. It is always good to check and verify them before committing to a policy.

What’s not covered?

Your warranty will not cover all items. Some appliances or systems may be excluded. This is dependent on whether you are on a basic, total or enhanced plan. Not all home warranty policies are the same, as several things are not usually covered by policies:

  1.    Items or systems not included in the terms of the contract
  2.    Items or systems that are damaged due to any reason other than normal wear and tear
  3.    Pre-existing damages discovered before the commencement of the policy
  4.    Items that were not properly fixed or installed
  5.    Outdoor items like sprinklers may also not be covered especially in basic plans
  6.    Swimming pools or spas
  7.    Septic systems

What is the policy upfront cost?

Depending on the company and the plan selected, a basic coverage for a home warranty policy may cost between $300 for a basic package to about $600 USD per year for comprehensive plans.

What service fees are required?

Aside from the contract fees, the landlord or homeowner is required to pay a fee per claim.

According to Investopedia, this may be around $75-$125. This fee may be lower if there are discounts available by the company. If the repair needs more than one contractor to get it fixed, the landlord may be required to pay service charges for each contractor.

What can cause my claim to be denied?

This is the aspect of buying a home warranty policy that often causes dispute between a landlord and the company. Claim denial is the situation where a request by a landlord for repair or replacement is rejected by the home warranty company. This happens when:

  1. The damaged appliance is not covered in the contract.
  2. There are improper installations of appliances
  3. Violation of codes are detected
  4. The damage is caused by unusual wear and tear due to lack of maintenance
  5. There are damages that existed before the commencement of the policy
  6. The terms and conditions

Make sure you understand the details of the home warranty plan. Thorough knowledge of this will help you in effectively comparing different companies.

Many disputes can typically be avoided if landlords take the time to read through and understand the details of the terms and conditions, asking questions in areas that require clarification.

When Do You Need a Home Warranty Contract?

Here are our suggestions:

  •    When your home is not new. If your house and the appliances in it is old, you should consider a home warranty policy.
  •    If you don’t have an emergency fund. If you do not have money set aside for an unforeseen breakdown of appliances, then it might be a good option to consider a home warranty policy.
  •    If the cost of repairs may be more than the cost of buying a warranty
  •    If you have expensive appliances
  •    When you do not have the time for DIY maintenance.  New landlords without multiple properties may be able to do repairs themselves, but those with multiple properties usually don’t have the time.  And, until you have enough properties to have a go-to “handy man”, the time and cost of hiring contracts may not be in your best interest.
  •    If you are unable to discern good contractors from bad contractors. Home warranty companies will provide you with a contractor that has been vetted.


If your home is new and you still aren’t sure about whether a home warranty will be a good option, then a trial may just be the best route. Most home warranty companies offer a 30-day money-back guarantee if you feel you no longer need the policy within the trial period.

However, at the end of the day, making a decision on whether or not a home warranty is in your best interest will greatly depend on your current situation – age of home, number of properties, rainy day funds available, etc.


Was this helpful?