Many people use the words insurance and warranty interchangeably because both offer some protection for those who buy them. But, as far as home coverage goes, the two terms mean different things. If you are aspiring to own a home soon, you need to note the differences between homeowner’s insurance and a home warranty.

Your home is a valuable asset that deserves protection. To make it a habitable place, you have installed systems and appliances that need to be secured. Home warranties and insurance provide different types of coverage. Before we delve deep into examples of what home warranty insurance covers, let’s take a look at the intricacies of each policy and why you need both.

Homeowner’s Insurance

One of the most outstanding achievements in life is having a roof over your head. Protecting your asset is an integral part of the homeownership journey. And, the best decision you can make is to purchase homeowner’s insurance. It safeguards your home from unexpected occurrences like trees, rain, hail, floods, wind, explosions, fires, and vandalism.

If weather, fire, or theft destroys a part of your house, homeowner’s insurance should assist you in rebuilding and replacing the damaged sections. What if a tree falls on the garage roof and destroys it? The policy will cover this loss as long as this kind of damage is covered in the contract.

Such disasters are known as perils in the fine print. In named-peril contracts, the insurance plan covers damages that are specified in the policy document. However, the open-peril contract caters to a wide array of tragedies except those that the plan excludes. If your washing machine stops working, a named-peril contract cannot provide payment for replacement or repair if the device is not included.

Various events can damage the structural integrity of your home and belongings. The four main areas under the insurance cover are:

· The interior and exterior sections of your home

· Loss and damage of structures

· Personal property lost to thieves

· General liability arising from injuries of persons in your residence, including their medical expenses

Depending on the type of coverage, you can pay anything from $300 to $1,000 in yearly premium. A bank requires this policy before issuing a mortgage loan, and the holder must renew the policy every year. All policies provide a deductible—the amount you pay when making a claim (about $100-$2,000). Then, the insurance provider takes care of all additional expenses.

Should the plumbing break and flood your house, call the insurance company immediately, and they’ll send an adjuster to see the extent of the damage. The first step of the claim process is filling out the claim form. As soon as the provider approves, they deduct your deductible and issue a check to cover the rest of the balance needed to repair the plumbing system. The deductible may also help to reduce the annual premium. Generally, a higher deductible results in a lower yearly policy premium.

 Homeowners Insurance vs. Home Warranty: Do You Know the Differences?

Home Warranty

This is a service contract that protects home appliances and internal systems. A homeowner’s warranty helps with the repair or replacement of household equipment that fail due to age or normal wear and tear. It covers plumbing, electrical, HVAC, and kitchen appliances. Some of the specific machines and systems covered are the furnace, washer, dryer, water heater, oven, and range.

Initially, individual gadgets are guaranteed by the manufacturer’s warranty, which has an expiration date. But, home warranties provide extended protection regardless of the system or appliance’s age. Each plan is definite and may include other amenities. If you wish, you can purchase add-on coverage for a refrigerator, swimming pool, and spa.

The contract term for a home warranty is 12 months, after which you have to renew. Expect to pay a yearly premium of between $300 and $600. Unlike homeowner’s insurance, the warranty is not a compulsory element of obtaining a mortgage. While it is purely optional, it is one of the smartest choices you can make for your newly built home.

If your HVAC fails, a licensed technician will come to examine the situation. They have to determine why the system has stopped working. It might be the end of its lifecycle or ordinary wear and tear. When the breakdown is covered under the service contract, the contractor arranges to have it repaired or replaced. You only pay a one-time fee for a service call, and the home warranty company pays the rest.

However, a homeowner’s warranty does guarantee payment for damages brought by the malfunctioning systems. For instance, if the plumb lines burst and cause flooding in the compound, the home warranty provider will only send a contractor to fix the leaky pipes. But, they will not pay for the structural damages caused by water. Fortunately, your home insurance plan will cover the latter.

You are probably wondering why you should choose a home warranty vs. repairing systems yourself. The most significant advantage is saving costs in the long run. Moreover, the hassle of finding a competent technician is off your shoulders. A good company ensures that the issue is diagnosed and resolved by a specialist of that particular appliance or system.

Another benefit of a home warranty is transferability to the next homebuyer. If you are trying to boost your home’s value before selling, you may have to buy a home warranty. It gives the potential buyer peace of mind when moving in.

Bottom Line

Home insurance and home warranty are excellent plans to safeguard different components of your home. Together, they save your budget from costly repairs that often present themselves inevitably. While the insurance is for the unexpected, a warranty check is for somehow predictable events. For example, you may be able to predict the breakdown of a kitchen device, but it is impossible to predict a burglary or home invasion.

As you can see, home warranties and insurance contracts operate in the same way. The difference is in what they cover and the amount of yearly premiums. Keep in mind that each policy is different. Take time to read the fine print and see what is covered so you’ll know what to expect in the event of breakages and home damage. Even though the insurance accounts for wind damage, it may not cover any flood in the basement resulting from the storm. Also, understand that some home warranties do not pay for breakages caused by abuse and negligence.

 

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