Owning a home is expensive. As a homeowner, you may find yourself faced with large, unexpected bills for home repairs or repairing and replacing the many systems and appliances inside the home.
Fortunately, options are available to significantly reduce or eliminate those unexpected and predictably unpredictable expenses that come with being a homeowner. To determine what kind of coverage you need, it’s important to understand the differences between home insurance and a home warranty.
Home Insurance and Home Warranty are Very Different
Let’s look at how they differ:
- Home insurance covers damage to the house itself, for example by theft, fire, weather and some natural disasters. (Depending on your location, you may have to purchase additional riders for floods or earthquakes.)
- Home insurance plans are closely regulated by state insurance commissioners, while home warranties are more loosely regulated and variable.
- If your home is damaged, the home insurance plan will pay for the repair or replacement of the contents, such as your appliances, your clothing, and any insured art or jewelry.
- Home insurance requires underwriting. Underwriting means that the cost of the policy depends on details about the home, its age, location, and construction, as well as its contents. In fact, some homes are uninsurable for a variety of reasons. Home warranties don’t require underwriting: everyone in the same area with the same standard warranty pays the same price.
- As long as you pay the premiums, your home insurance policy renews automatically. Home warranties are written for a specific period of time, after which you must renew them or they lapse.
- Home insurance almost always covers personal liability. For example, if your dog bites a child, your homeowner’s policy would cover costs not covered by the child’s medical insurance.
Home warranties do not cover these losses. Instead, think of home warranties as appliance insurance that is far cheaper than purchasing an extended appliance warranty for each appliance.
Home warranties cover major systems and appliances in your house against wear and tear and breakdown. Although the details vary according to each plan, home warranties typically cover appliances and systems used every day, including:
- Heating, ventilation and AC systems
- Water heater
- Plumbing and electrical systems
- Major kitchen appliances such as dishwasher, refrigerator, oven, built-in microwave, garbage disposal or trash compactor. (Home warranties typically exclude small consumer appliances like coffee makers and toasters.)
Why You Need Both Home Insurance and a Home Warranty
Home insurance protects against rare but foreseeable and often catastrophic damage to your home by fire, theft, natural disasters, and potentially lawsuits.
Home warranties, on the other hand, protect against the relatively frequent repairs and replacements of the major appliances and systems in your home. These costs can really add up over the years as these appliances are used on a daily basis, so delaying those repairs or replacement is impractical and at times impossible. An appliance warranty guarantees you don’t have to delay because your costs are covered.
When you're ready, start researching to find out which home warranty company is the right choice to protect your property, your comfort and your peace of mind.