As a real estate investor, protecting your investments is crucial. When it comes to safeguarding your properties, two common options are home insurance and home warranties. Understanding the differences between the two and weighing their pros and cons is essential in making informed decisions. Let’s explore the world of home insurance and home warranties to determine which option is best suited for real estate investors.

Home Insurance:

Home insurance is a policy that provides coverage for unexpected events and disasters that may damage your property. It typically protects the structure of the home, personal belongings, and liability in case of accidents on the property. Here are some pros and cons of home insurance for real estate investors:

Pros of Home Insurance:

1. Comprehensive Coverage: Home insurance offers broad protection against various risks, such as fire, theft, natural disasters, and vandalism.

2. Lender Requirement: If you have a mortgage on the property, your lender will likely require you to have home insurance.

3. Liability Coverage: Home insurance provides liability protection in case someone is injured on your property, reducing your financial risk.

Cons of Home Insurance:

1. Premiums and Deductibles: Home insurance comes with premiums that need to be paid regularly, and there may be deductibles to meet when filing a claim.

2. Limited Coverage for Wear and Tear: Home insurance generally does not cover repairs or replacements due to normal wear and tear or aging of the property.

3. Exclusions and Policy Limitations: Some events or damages may not be covered by your home insurance policy. It’s crucial to review the policy details and exclusions carefully.

Home Warranty:

A home warranty is a service contract that covers the repair or replacement of specific systems and appliances within your property. Unlike home insurance, which focuses on unexpected events, home warranties typically address breakdowns due to regular use.

Let’s examine the pros and cons of home warranties for real estate investors:

Pros of Home Warranty:

1. Budget Protection: A home warranty can provide financial relief by covering the costs of repairing or replacing covered items.

2. Convenience: With a home warranty, you have access to a network of pre-screened service providers, simplifying the process of addressing repairs.

3. Added Selling Point: Offering a home warranty to tenants or prospective buyers can increase the perceived value of the property.

Cons of Home Warranty:

1. Coverage Limitations: Home warranties typically have limitations on coverage, including specific items, age restrictions, and pre-existing conditions.

2. Service Call Fees: Each service call made to the warranty provider may require a service call fee, which can add up over time.

3. Potential Denials: Some claims may be denied based on various factors, such as improper maintenance or coverage exclusions.

Should Real Estate Investors Leverage Home Warranties?

Whether real estate investors should leverage home warranties depends on various factors, including the investor’s risk tolerance, property condition, and long-term goals. Here are some considerations:

1. Property Age and Condition: If you invest in older properties with aging systems and appliances, a home warranty can provide peace of mind and protect your budget from unexpected repair costs.

2. Cash Flow Management: Home warranties can help real estate investors budget for potential repairs, ensuring stable cash flow by avoiding significant out-of-pocket expenses.

3. Tenant Satisfaction: Offering a home warranty to tenants can increase tenant satisfaction and retention, as they have a reliable means of addressing repairs promptly.

4. Long-Term Investment Strategy: Real estate investors with a long-term investment strategy may find value in home warranties, especially if they plan to hold onto the property for several years.

I personally have mix experience with home warranty. On some occasion they are willing to replace my entire ac with no deductible. On some occasion they find all possible reason to deny the claim. As I am buying my team around rehabbing property, we slowing break away from home warranty and have no need for them anymore. The hassle of scheduling a call and wait for approval is just too much vs a phone call to your contractor.

If you are new to real estate investing and don’t have a team of contractor around you. I would give home warranty a try for a year or two. I will provide you some cushion while you look for your handy man or your team of contractor.


Home insurance and home warranties serve different purposes in protecting real estate investments. While home insurance provides comprehensive coverage against unexpected events, home warranties focus on the repair and replacement of systems and appliances due to regular wear and tear. Real estate investors should carefully evaluate their specific needs, property condition, and long-term goals to determine whether leveraging a home warranty is beneficial. As with any insurance or warranty, reviewing policy details, exclusions, and costs is crucial in making an informed decision that aligns with your investment strategy and risk tolerance.