When it comes to protecting your home, there are two options available: home insurance and home warranty. However, many homeowners often confuse these two and end up not getting the right coverage they need. In this article, we will explain the differences between home warranty and home insurance, what each one covers, and which one is better for you.
What is Home Warranty?
A home warranty is a service contract that covers the repair or replacement of major home systems and appliances. It is not insurance, but rather a type of protection plan that covers mechanical failures due to normal wear and tear. A home warranty can be purchased by the homeowner or provided by a seller as part of a home sale.
What does Home Warranty Cover?
A home warranty typically covers the following items:
Items |
Coverage |
Heating, ventilation, and air conditioning (HVAC) |
Includes furnace, central air conditioning, ductwork, and thermostats |
Plumbing |
Includes water heater, faucets, toilets, and pipes |
Electrical |
Includes wiring, circuit breakers, and outlets |
Appliances |
Includes oven, stove, dishwasher, refrigerator, and washer/dryer |
How does Home Warranty work?
When a covered home system or appliance breaks down, you can call your home warranty provider, and they will send a qualified technician to diagnose and repair the issue. Depending on your contract, you may be responsible for paying a service fee, which is typically between $50 and $150 per claim.
What are the Pros and Cons of Home Warranty?
Pros:
- Provides coverage for unexpected repairs or replacements
- Offers peace of mind
- Can be transferred to a new homeowner
- Can save you money on costly repairs or replacements
Cons:
- May have limitations and exclusions
- May require a service fee for each claim
- May not cover pre-existing conditions or known issues
- May not cover cosmetic damage or code violations
What is Home Insurance?
Home insurance is a type of insurance policy that provides financial protection against damage or loss caused by unexpected events, such as fire, theft, or natural disasters. Home insurance is typically required by mortgage lenders and covers both the physical structure of your home and your personal belongings.
What does Home Insurance Cover?
A home insurance policy typically covers the following items:
Items |
Coverage |
Dwelling |
Covers the structure of your home, including walls, roof, and foundation |
Personal belongings |
Covers your furniture, appliances, clothing, and other personal items |
Personal liability |
Covers legal expenses and damages if someone is injured or their property is damaged while on your property |
Additional living expenses |
Covers the cost of living elsewhere if your home is uninhabitable due to a covered event |
How does Home Insurance work?
If your home or personal belongings are damaged or destroyed by a covered event, you can file a claim with your insurance company. Your insurer will send an adjuster to assess the damage and determine how much they will pay for repairs or replacements. Depending on your policy, you may be responsible for paying a deductible, which is the amount you have to pay out of pocket before your insurance kicks in.
What are the Pros and Cons of Home Insurance?
Pros:
- Provides financial protection against unexpected events
- Covers both the structure of your home and your personal belongings
- May offer additional living expenses if your home is uninhabitable
- May offer personal liability coverage
Cons:
- Can be expensive
- May have limitations and exclusions
- May require a high deductible
- May not cover certain types of damage, such as flooding or earthquakes
What should you choose, Home Warranty or Home Insurance?
The decision between home warranty and home insurance depends on your individual needs and budget. If you have older home systems and appliances that are more prone to break down, a home warranty may be a cost-effective solution. However, if you live in an area that is prone to natural disasters or have expensive personal belongings, home insurance may be the better option. Ultimately, a combination of home warranty and home insurance may offer the most comprehensive coverage.
FAQ
What is the difference between Home Warranty and Home Insurance?
A home warranty covers the repair or replacement of major home systems and appliances due to normal wear and tear, while home insurance covers damage or loss caused by unexpected events, such as fire or theft.
Do I need both Home Warranty and Home Insurance?
It depends on your individual needs and budget. A combination of home warranty and home insurance may offer the most comprehensive coverage.
Can I transfer my Home Warranty to a new homeowner?
Yes, most home warranties are transferable to a new homeowner.
Does Home Warranty cover pre-existing conditions or known issues?
No, most home warranties do not cover pre-existing conditions or known issues.
Does Home Insurance cover flooding or earthquakes?
Most standard home insurance policies do not cover flooding or earthquakes. Separate policies may be required for these types of events.
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