Features and Coverage of Home Warranty vs Home Insurance

There’s perhaps no greater real estate investment than buying a home. Needless to say, protecting that investment becomes crucial. A home warranty and homeowner’s insurance are two of the best ways to safeguard your home. And, your budget. So, when you compare home warranty vs home insurance, which one covers more elements?

This article will guide you through the key features of home warranty and home insurance, their pros and cons, and a complete list of their respective coverage. 

Both protect your home in their own way. After all, a house needs costly repairs from time to time — something will either need to be repaired or replaced. This unpredictable nature of your expenses makes a home warranty and home insurance worthwhile purchases.

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What is a home warranty?

A home warranty is a type of service contract that allows for repair or replacement of your appliances and equipment that malfunction due to age or normal wear and tear. 

A home warranty would typically cover your HVAC system, electrical, and plumbing, kitchen appliances, washer/dryer, and even a swimming pool or a spa. 

Generally, home warranty companies offer 12-month contract terms. It’s easy to purchase a home warranty plan for about $75 per month. You can increase the home warranty coverage for additional items as and when required. Moreover, you can buy a home warranty anytime — on a house of any age. 

What does a home warranty cover?

Every home warranty program is individually managed. You can select the servicing, replacement, or malfunction coverage for each household item.

Here are some appliances and services that a good home warranty should cover:

• Plumbing system 
• HVAC system
• Electrical wiring
• Dishwashers
• Washers and dryers
• Repair services by contractors
• Refrigerators
• Stoves
• Garbage disposal
• Ceiling fans 
• Jacuzzi, swimming pool or spa

Pros and cons of a home warranty

A good home warranty coverage protects you financially by potentially saving you hundreds of dollars. Plus. there’s no headache of finding a trusted service contractor for the repair work.

Pros

• Offers peace of mind
• Fewer unexpected repair costs
• Offers set premiums and deductible for repair costs

Cons

• Doesn’t cover all appliances
• If covered appliances are not maintained, you may lose their coverage 
• Requires you to pay premiums all year, even if you don’t end up needing coverage
• Doesn’t cover damage from a fire or other natural disasters 

Read more: Why homeowners need home warranty?

What is homeowner’s insurance?

As the name suggests, a home insurance policy covers any accidental damage to your home and belongings if it’s a result of theft, vandalism, storm, fire, and other natural disasters. Therefore getting a home insurance policy is a good step to protect your finances. 

The policy covers four primary areas of your house: the interior and exterior of your home, personal property due to theft, loss or damage, and general liability if someone is injured while on your property.

Although a home insurance policy is not required by law (unlike car insurance), it’s usually a mandatory requirement by a bank or mortgage lender. They will only issue you a home mortgage if you get a policy. And, once you have a policy, you need to renew it yearly. 

The average annual cost of a home insurance policy is between $300 and $1000. Often, your monthly payment will include the cost of homeowners insurance along with your mortgage and property taxes.

When you make a claim on your home insurance, you need to pay a deductible cost to the insurance company. The higher the deductible, the lower will be the cost of your yearly home insurance policy.

Read more: Why do you need manufactured home insurance?

What does homeowners insurance cover?

A homeowners insurance policy protects the structure of your home and personal belongings against damage caused by:

• Fire
• Storms and severe weather conditions
• Vandalism and accidents
• Other natural disasters

Pros and cons of homeowners insurance 

Homeowners insurance safeguards you and your residence from any major loss caused by specified perils. If you do not have a homeowner’s insurance policy, you will end up having to pay for all repair or replacement costs out of your own pocket.

Pros:

• Protects the structure of your home.
• Safeguards your personal belongings. 
• Aids you in the event of a lawsuit if someone is injured on your property.
• Covers living expenses if your home is unusable after a covered hazard.

Cons:

• Homeowners insurance does not cover all types of hazards, such as earthquakes or floods (You will need special earthquake insurance or flood insurance).
• It doesn’t cover items that break due to normal wear and tear. 
• The policy doesn’t cover the cost if the plumbing, water heater, or air conditioner stops working (this is where a home warranty can help).

Home warranty vs home insurance: differences

To put it simply, while insurance covers unexpected events resulting in damages, warranties cover anticipated events such as aging and breakdown of appliances and systems.

Here’s a quick look at the differences between a home warranty and homeowners insurance:

Read more: 10 most-asked questions on home warranty insurance

Last words

You would want your home to be a place where you can relax and have complete peace of mind. However, owning a home does come with its occasional (and expensive) repairs and replacements. 

Both home warranty as well as home insurance work well together to cover your home and safeguard your budget. Whether it’s repairing a broken appliance or replacing a damaged roof after a storm — you are well taken care of! 

Read more: Can American Home Insurance Cover Homes Overseas?

Written by Ramona Sinha. August 5, 2020

Ramona is a content writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. An avid traveler, she’s a digital nomad at heart and an animal lover from the depths of her soul.