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What Is The Difference Between A Home Warranty And Home Insurance?

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When you own a home, it’s your responsibility to maintain all assets and systems that keep it running smoothly. When everything is working properly, your home becomes a place of peace and relaxation. Owning a home is one of life’s biggest investments. Protecting your property is not only wise; it is necessary. The best way to do this is to purchase home insurance and a home warranty system. Purchasing both of these products will protect your home, property, appliances, and system components if they need to be replaced or repaired.

The terms “warranty” and “insurance” imply that the buyer is protected somehow. However, the two terms are very different when it comes to protecting the home. Every homeowner should know the difference between a home warranty and home insurance for many reasons.

American Home Warranty serves homeowners across the United States and will always explain the difference between these two levels of protection. Below are some simple examples of what warranties and home insurance mean in practice and everyday life.

What is a Home Warranty?  

Think of home warranty covers the same way you would think of warranty coverage for a new car or technology device such as a smartphone or laptop. It’s an insurance policy that covers the cost of maintaining, repairing, or replacing certain home systems in the event of unexpected failure due to manufacturing defects, wear and tear, or other problems.

The warranty is non-binding and generally covers basic systems (electrical, plumbing) and standard appliances. The more extensive the coverage, the higher the price.

What Does Home Warranty Cover? 

Unlike home insurance, a home warranty is a service contract. It usually covers major appliances and equipment, which are repaired or replaced in the event of damage or total breakdown.

Home warranty insurance typically includes the following coverages

  • Plumbing
  • Heating and cooling systems
  • Appliances include stoves, ovens, refrigerators, dishwashers, washing machines, dryers, and garbage disposals.

Note: Most home insurance policies provide additional coverage for hot tubs and pools for a fee.

What is home insurance?

Homeowners’ insurance covers the essentials of the home, both inside and out. Because of its importance, it is usually mandatory, like auto insurance. This is because the home is an asset of the mortgage company, and if the loan has not been paid, the mortgage company must maintain the home’s value.

What does home insurance cover?

Homeowners insurance usually protects you in the event of a major disaster. It protects you and your home against damage or loss caused by

  • Natural disasters such as hurricanes, hail, and tornadoes.
  • Fires caused by gas leaks, electrical problems, etc.
  • Burglary
  • Vandalism

Please Note. Homeowners insurance covers the interior and exterior of your home as well as your personal property. It also protects you from liability if someone gets injuries on your property.

There are different main areas of coverage: the interior and exterior of your home, theft and damage to personal property, and general liability if someone gets injuries on your premises.

How to choose your insurance and warranty?

In theory, a good homeowner’s policy can protect you from costly repairs not covered by home insurance. However, warranty providers often exclude coverage for questionable or subjective technical reasons, making it difficult to recover the amount paid for insurance. There is also the risk of receiving substandard repairs from a builder you did not choose.

To determine if a home warranty system is right for you, check to see if your unit has a manufacturer’s warranty. How much does it cost to repair or replace each appliance? Compare that cost with the cost you pay to the warranty company.

Do your homework first.

Before you sign a home warranty contract, consider the following tips.

  • Review the contract and agreement. Find out what is covered and what is not.
  • Make sure you know the terms and conditions of the contract and what is covered. Find out about the company’s options and service providers. Are they reputable, licensed, bonded, and insured locally? You can check the Better Business Bureau’s ratings.
  • Consult a home inspector. This expert can tell you when a home’s appliances and systems are likely to fail and whether it’s worth seeking a home warranty.

Read the fine print.

Every insurance policy is different, and you need to take the time to understand what is covered and what is not. If something breaks or accident damage happens in your new home, you will know what to do. For example, a homeowner’s policy may cover wind damage, but you may not be covered if the same storm system floods your basement unless you have another policy.

It’s important to know that some home insurance policies don’t cover everything. As with home insurance, damage caused by negligence or misuse may not be covered. Take the time to educate yourself to prepare for life’s surprises.

Author Bio

Villie Walters Ramirez is a 32-year-old sales assistant at a tax king who enjoys Accounting Services NYC and bookkeeping. She has a post-graduate degree in accounting, and she has a severe phobia of cats. She enjoys traveling A lot.

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