Are Home Warranties Worth the Cost?

Home warranties promise to protect rental property owners from unexpected repair expenses. But are they actually worth the cost?

In our experience at Rentals America, home warranties generally aren’t a good investment for rental property owners. While they can occasionally save money on major repairs, coverage limitations, service delays, and restrictions on contractor selection often outweigh the benefits.

For landlords, particularly in markets like Phoenix where air conditioning failures require prompt attention, those disadvantages can become especially costly.

Our recommendation is to skip the home warranty and instead set aside the money you would otherwise spend on annual premiums and service call fees (copays). This gives you greater control over contractors, repair decisions, and service timelines.

What Does a Home Warranty Cover?

A home warranty is a service contract that helps pay for certain repairs or replacements when covered household systems and appliances fail.

Depending on the plan, coverage may include HVAC systems, water heaters, plumbing, electrical systems, kitchen appliances, and laundry equipment.

Owners typically pay an annual premium along with a service fee whenever a repair is requested.

The appeal is straightforward: instead of paying the full cost of an unexpected repair, the owner pays a smaller, more predictable amount.

However, having a home warranty doesn’t mean the entire cost of a repair or replacement will be covered. Exclusions, coverage limits, and additional charges can substantially reduce the value of a policy.

Why We Generally Don’t Recommend Home Warranties for Rental Properties

After years of coordinating maintenance for rental homes, we’ve found that home warranties often create challenges that owners don’t anticipate when purchasing coverage.

1. Repair Delays Can Cost More Than the Warranty Saves

One of the biggest concerns we’ve experienced with home warranties is the additional time involved in getting repairs completed.

Instead of contacting a trusted contractor directly, repairs may require submitting a claim, waiting for an assigned vendor, scheduling an inspection, and obtaining authorization before work can begin.

We’ve encountered situations where the home warranty company purchases replacement parts and ships them directly to the contractor rather than allowing the contractor to source the parts locally. While this can reduce costs for the warranty company, we’ve seen relatively simple repairs take 10–14 days to complete as a result.

For a homeowner living in their own property, that delay may be frustrating. For a landlord, it can become a much bigger problem.

Rental property owners have obligations to maintain their properties and provide essential services. When an air conditioner or water heater stops working, waiting nearly two weeks for a repair may not be acceptable.

Depending on the circumstances and applicable law, prolonged interruptions can result in rent credits, other resident remedies, and additional expenses.

The cost of compensating a resident for days without an essential service can quickly exceed whatever the home warranty saved on the repair.

This illustrates one of our biggest concerns with home warranties: the warranty company’s incentive to minimize repair costs doesn’t always align with the landlord’s responsibility to restore service promptly.

2. Coverage Exclusions Can Eliminate the Expected Savings

Home warranties aren’t nearly as useful as many owners expect, particularly when they discover how much of a supposedly covered repair remains their responsibility.

For example, a home warranty may cover the replacement of a failed water heater but leave the owner responsible for removing and disposing of the old unit. We’ve encountered situations where these additional haul-off charges can amount to hundreds of dollars.

When those expenses are added to the annual warranty premium and service fee, there may be little or no savings compared with hiring a contractor directly.

Air conditioning repairs can present similar problems. A warranty might cover a failed HVAC component but exclude some or all of the refrigerant required to complete the repair. Depending on the system and the amount needed, refrigerant costs can be substantial.

Other potential exclusions include modifications, certain installation expenses, and repairs that exceed the warranty company’s coverage limits.

The important question isn’t whether a system is covered. It’s how much the warranty company will actually pay when that system fails.

3. Warranty Companies May Favor Temporary Repairs Over Replacement

Another challenge we’ve encountered is the tendency for warranty companies to favor lower-cost repairs, even when replacing an aging appliance or system may be the better long-term decision.

A contractor may repair a component, only for the same equipment to experience another failure shortly afterward.

This can lead to additional service calls, more delays, and repeated inconvenience for residents.

From the warranty company’s perspective, repairing a component may be less expensive than replacing the entire system.

From the property owner’s perspective, however, repeated repairs can become more costly over time, particularly when they affect resident satisfaction or lead to additional maintenance expenses.

Owners should be able to evaluate whether continued repairs make financial sense or whether replacement would provide better long-term value.

4. Owners Lose Control Over Contractor Selection

Most home warranty companies require repairs to be performed by contractors within their approved network.

That means the owner or property manager may have limited control over who performs the work, how quickly they respond, or the quality of service provided.

At Rentals America, we work with established vendors who understand the expectations involved in maintaining occupied rental properties.

When repairs are handled directly, we have greater flexibility to select qualified contractors, address service concerns, and arrange alternative vendors when necessary.

With a home warranty, those decisions are largely controlled by the warranty provider.

5. Delayed Maintenance Can Affect Resident Retention

Maintenance service plays an important role in the resident experience.

When repairs are completed promptly and professionally, residents are more likely to feel that their concerns are being taken seriously.

When repairs involve repeated appointments, extended delays, or recurring equipment failures, frustration can build.

A resident who decides not to renew because of ongoing maintenance problems can leave the owner facing vacancy, leasing expenses, and potentially lost rental income.

Even when a home warranty reduces the cost of an individual repair, the potential expense of losing a good resident can outweigh those savings.

Why Home Warranties Are Especially Challenging for Phoenix Rental Properties

Phoenix’s extreme summer temperatures make air conditioning reliability particularly important.

When an air conditioner fails during the hottest months of the year, waiting several days for a warranty company to assign a contractor or authorize a repair may not be practical.

Arizona landlords have legal obligations regarding the condition of rental properties and the availability of essential services. A home warranty does not relieve an owner of those responsibilities.

At Rentals America, when an owner has an existing home warranty, we make an effort to coordinate covered repairs through that provider.

However, when an urgent repair cannot be completed within the required timeframe through the warranty company, we may need to assign another qualified contractor to get the work completed.

This can mean the owner pays for a repair that might otherwise have been covered under the warranty.

While that may seem frustrating, our priority is protecting the property, addressing the resident’s needs, and meeting applicable maintenance obligations.

The ability to act quickly is particularly important when dealing with essential services such as air conditioning and hot water.

When Might a Home Warranty Be Worth It?

Although we generally discourage home warranties for rental properties, there are situations where they may provide value.

For example, a warranty included with the purchase of a property may offer some protection during the initial ownership period.

An owner with limited financial reserves may also appreciate the possibility of reducing a large, unexpected repair expense, although a warranty is not a substitute for adequate reserves.

Occasionally, a warranty will cover a major system replacement with relatively little out-of-pocket cost, providing meaningful savings.

However, these benefits need to be weighed against annual premiums, service fees, coverage exclusions, repair delays, and restrictions on contractor selection.

A Better Alternative: Build a Rental Property Maintenance Reserve

Rather than purchasing a home warranty, our recommendation is to set aside the money that would otherwise be spent on annual premiums and service call fees (copays).

Over time, these funds can accumulate into a reserve for future repairs and replacements.

Consider this hypothetical example:

By setting aside that same $1,000 annually, an owner could contribute $5,000 toward a maintenance reserve over five years, before accounting for any repair spending or interest earned.

That reserve won’t necessarily cover every major expense, particularly an HVAC replacement, but the money remains available for the owner’s use rather than being spent on premiums and service fees that may provide little benefit.

More importantly, paying for repairs directly offers several advantages:

• Contractor selection: Choose qualified vendors based on reliability, availability, and workmanship.

• Repair decisions: Decide whether repairing or replacing equipment provides better long-term value.

• Faster service: Schedule repairs without waiting for warranty authorization.

• Cost transparency: Evaluate the full cost of the work without navigating exclusions and coverage limits.

• Greater flexibility: Address urgent maintenance needs based on the property’s circumstances.

Owners should maintain additional reserves beyond the amount saved on warranty premiums and service fees, especially when major systems are approaching the end of their useful lives.

For more guidance on budgeting, preventative maintenance, and managing repair expenses, see our Rental Property Maintenance Guide. [Website team: insert verified internal link.]

Our Recommendation: Skip the Home Warranty and Maintain Control

For most rental property owners, we believe the disadvantages of home warranties outweigh the potential savings.

Our experience coordinating repairs has shown that delays, coverage exclusions, and limited control over vendors can create expenses that aren’t apparent when purchasing a warranty.

We recommend putting the money you would otherwise spend on premiums and copays into a maintenance reserve and working with reliable contractors who can respond promptly.

The goal isn’t simply to minimize the cost of an individual repair. It’s to protect your property, provide residents with dependable service, and manage maintenance expenses effectively over the long term.

Frequently Asked Questions

Are home warranties worth it for rental properties?

In our experience, generally not. Although home warranties can occasionally cover expensive repairs, annual premiums, service fees, coverage exclusions, and repair delays often reduce or eliminate the savings.

Do home warranties cover air conditioning repairs in Phoenix?

Many plans include HVAC coverage, but exclusions and coverage limits vary. Refrigerant, installation modifications, and related expenses may not be fully covered. Owners should also consider how quickly the provider can respond during extreme heat.

Can a landlord use their own contractor with a home warranty?

Most warranty providers require owners to use approved contractors. Some allow outside contractors with prior authorization, but using an unapproved vendor can result in a denied claim.

What happens if a home warranty company takes too long to repair an air conditioner?

The owner remains responsible for meeting applicable maintenance and habitability requirements. Depending on the circumstances, another contractor may need to be assigned even if the repair won’t be covered by the warranty. Residents may also have legal remedies when essential services aren’t restored as required.

Is it better to save money for repairs instead of buying a home warranty?

For owners who can maintain adequate financial reserves, we generally recommend saving the money that would otherwise be spent on warranty premiums and service call fees. This provides greater flexibility in selecting contractors, making repair decisions, and responding to urgent maintenance needs.