A home is one of the most significant investments a person can ever have. That’s why every homeowner should protect his or her home at all costs. The best way to achieve this is by purchasing both a home warranty and a home insurance policy. Both of them will cover your home, appliances, personal possessions, and system components in case they need to be replaced or repaired. 

However, it is important to understand the differences between a home insurance policy and a home residential warranty, what they cover, and whether or not it makes sense to have both types of policies. This article gives you deep insight into everything you need to know about these two. Keep on reading to explore them.

What is a home warranty?

A home warranty is a service contract that provides for repairs or replacements of your appliances and system components that fail due to wear and tear and age. These appliances can be refrigerators, ovens, washers, and dryers. The system component may include the HVAC, electrical, and plumbing systems. 

Although a home warranty contract is similar to home insurance, especially in how the homeowners use it, they are quite different.

How does a home warranty works

Let’s say, if your appliance or system component in your home breaks down, you don’t have to call a contractor or a repair company to come and fix it, you will just call your home warranty company to come and diagnose the problem. 

If it is determined that the system or appliance is no longer functioning due to age of wear and tear, and the breakdown is covered under a home warranty contract, the home warranty will repair it or even replace it if necessary. 

You will pay a flat-rate service call fee, which can be from $60-$100, depending on the home warranty company, and then the company will pay for the repair or replacement. The only thing that the homeowner will be required to pay is a service call fee and the annual premium. 

Of course, the protection of home warranty can save homeowners hundreds or even thousands of out-of-pocket dollars and the hassle that comes with finding a reliable and trustworthy service contractor to do the repairs. So, purchasing a home warranty is a smart move that every homeowner should make if they want to protect their home system and appliances.

What does a home warranty cover?

As mentioned above, a home warranty covers the major systems in a home, such as the home’s cooling, heating, electrical, and plumbing systems. It also covers appliances in home, such as the oven, washer, dryer, dishwasher, and refrigerator. It is also worth mentioning that home warranty service providers generally have different plans available that provide coverage on all these items or just a selected few. 

On the other hand, a home warranty does not cover damage caused by malfunctioning appliances or systems. For instance, if a toilet was leaking, the home warranty company would only pay to fix the toilet, but wouldn’t pay to repair any water damage caused to the home structure due to the leaking toilet. This would be covered by homeowners insurance.

What is homeowners insurance?

A home insurance policy covers any damage to the structure of the house and belongings due to storms, theft, fire, and other natural disasters. Home insurance is generally mandatory. Certain home insurance may also cover medical expenses that people sustained by being on your property. A home insurance policy is renewed every year, and its average annual cost is between $300 and $1000. 

How does it work?

Let’s say, if a pipe breaks and floods your kitchen or any room, you will contact an insurance company. The company will send their adjuster who will come to your home and then fill out a claim for repair and replacement of any damaged items in your home. 

Once your claim has been approved, the insurance firm will deduct the amount of your deductible and then issue a payment to cover the cost of repairing your home. The deductible is the amount of money a homeowner should pay before the insurance firm pays any money towards his or her claim.

What does home insurance cover?

As mentioned above home insurance covers damage to a house’s structure and a homeowners’ personal property from fires, floods, theft, hail, wind, trees, explosions, etc. Home insurance policies generally call these “perils” in their contract. 

Homeowner’s insurance policies do not cover the actual appliances and systems in a home if they break down. So if your HVAC system needs to be replaced because it had gotten old and worn out, your home insurance policy wouldn’t pay to replace it. 

However, if the HVAC system started a fire, your insurance company would most likely cover the damages caused by that fire. Fortunately, if your HVAC system does break down due to age, your home warranty will cover it. 

What is the difference between Home warranty and Home Insurance?

Both home warranty contracts and home insurance policies operate in similar ways. Both have an annual premium and deductible. 

The key difference between home warranties and home insurance is what they cover. Home insurance helps homeowners to pay for structural damage and loss of personal property from emergencies, such as theft, fire, or a storm. A home warranty, on the other hand, covers repairs and replacements of a home’s system and appliances when they breakdown due to old age or tear and wear. 

Another main difference between the two is that home insurance is generally mandatory for homeowners, while a home warranty plan is not required; a homeowner can decide to purchase it or not. 

Both home warranty and home insurance provide protection on different parts of a house, and together, they can protect a owner of home in budget from costly repairs when they unexpectedly crop up.

Does your home need both home insurance and a home warranty?

Of course, a homeowner needs both home insurance and home warranty in their home to protect their home against fire and theft as well as protect their home’s systems and appliances. In case damage occurs to the structure of the house, the homeowners won’t have to dig deeper into their pockets to cover for repairs because the insurance company will cover everything. Additionally, if your home’s appliances or systems fail or any damage is caused by malfunctioning appliances or systems, a home warranty plan will cover the costly repairs or replacements if necessary, hence saving you a significant amount of money.

A homeowners insurance policy and home warranty offer different types of coverage that may give you peace of mind. Accidents can happen any time when you least expect them. And there’s nothing better than knowing that your home structure, systems, and appliances are protected. These two will give you the ultimate peace of mind.

Final words

As mentioned above, purchasing home insurance and a home warranty is the best thing a homeowner can do to protect his or her home. These two come with plenty of benefits, including being cost-effective, providing utmost protection, giving homeowners peace of mind, and so much more. 

So if you have been contemplating purchasing a home warranty, this is the perfect time to do so and join the other millions of homeowners in the U.S. who have a home warranty plan. However, you need to research to learn the different types of coverage available before you settle on one.