Home Insurance versus Home Warranty
You probably know that if you own your home you need home insurance but what is a home warranty? Do you need both? When you purchase a home, new or old, it is normally recommended that you purchase a home warranty for at least the first year. But do you need it after that? While both warranty and insurance offer some form of protection, they are very different. Let’s take a look at the difference between them as it is important to understand how to best protect yourself and your home if anything were to go wrong.
A basic home insurance policy covers any accidental damages and loss that are caused by fire, lightning strikes, windstorms, hail, or even vandalism committed by a burglar. However, damage from earthquakes and floods is typically not covered but can be purchased separately. If any of these events damage or destroy a portion or all of your home, insurance would help you rebuild and replace it.
A quality home insurance policy will not only cover damage to property, but also liability for injuries to guests on your property or the replacement of personal property in case of theft or damage. Make sure to keep in mind that each type of coverage in the policy is subject to a limit and, in most cases, you will have to pay a deductible. Just like other insurance policies, your level of coverage and deductible limits will play a part in determining your rate.
While individual appliances may initially be covered under manufacturers’ warranties, these only last for a limited period of time. Home warranties are designed to cover the cost of repairs and replacements of larger appliances and crucial systems in your home that may fail or break due to age and everyday wear and tear. This includes but isn’t limited to:
- Plumbing components
- Kitchen appliances
- Washer and Dryer
With a home warranty, you are required to pay premiums year-round, even if you do not use it, and it won’t cover damages if appliances were not maintained properly or if the damage is from a fire or other disaster.
Are Homeowners Required to Buy These Coverages?
Typically, lenders require home insurance as a condition of issuing the mortgage. From the bank’s perspective, insurance reduces the risk of the lender defaulting on the loan because payments are more likely to stay affordable even in the face of damage. A home warranty is optional.
Who Should Buy a Home Warranty?
Anyone who owns a home can benefit from a home warranty as they are designed to reduce the risk of unexpected big-budget expenses but there are exceptions.
You should consider a home warranty if your HVAC system is nearing the end of its useful life. These systems can be very expensive to replace, and a home warranty can ease the financial burden if your heating, ventilation, or air conditioning system breaks. A home warranty is also helpful to cover older appliances, especially if the manufacturers’ warranties have expired.
If you don’t have a list of home service professionals to fix plumbing, electrical, or appliances, a home warranty is helpful. That’s because after you call the home warranty company to file a claim, the company will send out a local technician if you have warranty coverage for the problem in question. You don’t have to worry about hunting down plumbers, electricians, or other service providers to fix your appliances and home systems, and your out-of-pocket cost will be limited to the service fees, which are typically minimal.
A home warranty probably isn’t necessary if you’re able to fix problems yourself or if your appliances and home systems are newer. If your appliances have active manufacturers’ warranties, a home warranty won’t cover them.
Read the Fine Print
Every insurance policy is different, so take the time to understand what’s covered and what isn’t. When something unexpectedly breaks or gets damaged in your new home, you’ll know what to expect.
The bottom-line difference with regards to warranty vs. insurance is that insurance covers unexpected events that lead to damage, while warranties cover events that are somewhat expected, such as the aging and ultimate breakdown of appliances and systems. A home warranty isn’t a replacement for home insurance but rather a home warranty complements home insurance.
Contact Arrive Real Estate Group to help ensure you are properly covered on the purchase of your next property!