Your home is your most valuable asset, which is why homeowners insure them against damage. In doing so, many homeowners assume their home insurance policy covers all types of harm, but this isn’t the case. Home insurance doesn’t protect against damage that occurs over time from normal use, also known as wear and tear. Wear and tear accumulates slowly, but repairing it can cost hundreds or even thousands of dollars. As a result, homeowners who don’t understand the advantages of a home warranty vs. home insurance often wind up shouldering these costs when they don’t have to.
Home Warranty vs. Home Insurance
Home insurance protects you from perils, which the industry defines as disaster, fire, vandalism, and burglary. Floods and earthquakes are covered by separate policies. Most home insurance policies pay for:
- Houses. If your house is damaged by a fire, accident, or disaster, your insurance will provide funds to help you rebuild.
- Personal Possessions. Insurance providers will help replace any clothes, furniture, appliances, or electronic hardware that was either stolen by thieves or destroyed when your house was damaged.
- Liability. When someone is injured on your property, there is a chance you could be legally responsible for their medical bills. In this scenario, if someone files a lawsuit against you, your insurance company will cover any damages you’re required to pay.
- Living Expenses. If you’re left homeless after a disaster, your insurance provider will pay for temporary shelter (e.g. a hotel) until work crews have finished repairing your house.
If you’re lucky, you’ll never suffer through such an event and will never need to file a claim with your home insurance provider. However, if you have a home warranty, you’ll almost certainly need to file a claim at some point. That’s the main difference between a home warranty vs. home insurance policy: home insurance protects you from things that might happen while a home warranty protects you from things that will happen.
Benefits of a Home Warranty
Homeowners who purchase a home warranty receive three primary benefits:
- Discounted Repair Services. Home warranties pay to repair a system that might cost thousands of dollars to replace. However, a warranty only protects against wear and tear. Problems caused by faulty parts, poor maintenance, or improper installation generally aren’t covered.
- Reliable Support. Finding a skilled contractor or technician can be a headache. Home warranty companies research repairmen in your area, so you can be certain that the person who comes to your door has the skills to restore your home quickly and competently.
- Improves Resale Value. Unlike home insurance, a home warranty can be transferred to a new owner when you sell your house. This can help entice potential buyers, who can rest assured that they won’t have to pay for major repairs out-of-pocket after they move in.
Home warranties protect you from inevitable expenses. Every home system, no matter how well maintained, has an operational lifespan. It may be ten years or thirty years, but eventually it wears out. And without a home warranty or repair program, you’ll be stuck paying for them on your own.
Warranty Types
There are three types of home warranties:
- Appliance Plans. Protect devices that assist with household chores, such as ovens, refrigerators, and washing machines.
- System Plans. Protect the basic hardware that makes your house livable, such as furnaces, air conditioning, and electrical wiring.
- Combination Plans. Protect appliances and home systems. They may protect all of them or only some of them, based on what type of coverage you choose.
For the protection they provide, home warranties are extremely cost-effective. They’re less expensive than home insurance, but with more day-to-day applicability. Most come with a deductible. The lower the deductible, the higher your monthly payments. Some warranties charge a service fee whenever a technician visits your home to inspect or diagnose a problem. The size of the fee varies, but they’re only paid once. Unforeseen circumstances and breakdowns can endanger your finances, leaving homeowners in serious debt. By signing up for a home warranty in addition to home insurance, homeowners mitigate these risks, ensuring comprehensive coverage against accident, misfortune, and depreciation.
