People often get confused about the subject of home warranties. In fact, many homeowners assume that if they have homeowners insurance, a home warranty is unnecessary. This couldn't be further from the truth. In fact, home warranties cover an entirely different set of damages and occurrences than homeowners insurance, and both are important if you want to protect your home and belongings. If you're a little confused about these two seemingly similar policies, the options that come along with them, and what exactly is covered by each one, fear not. By the end of this article, you'll be a home insurance pro.
To the unaware, a home warranty policy might sound like the same thing as homeowners insurance. Once you start to look into them, though, you realize that they are totally different policy types. One covers appliance breakdowns, while the other covers natural disasters. One has a high deductible, while the other charges a nominal fee. One is often required by law, while the other is totally optional. Yes, there really are a lot of differences once you start researching. In case all of this is overwhelming for you, let’s break down the major differences you need to be aware of. This will save you time and confusion.
Definitely the biggest difference between the two insurances is coverage. Broadly speaking, a home warranty covers appliances and systems that break down, while homeowners insurance covers structural damage, personal liability, and repairs due to damages caused by natural disasters, vandalism, and other third party causes.
Another difference is how much and how often you pay premiums and deductibles. The deductible for a home warranty is considerably less than for homeowners insurance. You can expect to pay anywhere between $50-$125 for a technician to visit and repair your appliances. Homeowners insurance deductibles are considerably higher.
Finally, homeowners insurance is almost always a required policy to have. Meanwhile, a home warranty isn’t mandatory (it’s just a good idea!).
Now we know what home warranty policies don’t cover, let’s explore in more detail what they do cover. A home warranty will repair or replace an appliance or home system that has been damaged or breaks down during the course of normal usage or regular wear and tear. For more specific details about what that entails, you can check your warranty policy. It’ll have exact details and parameters concerning what is covered and what is not. Here are the usual appliances and systems covered by most home warranty providers:
Now that you're familiar with the differences between a home warranty and homeowners insurance, you might have a question. Do I really need a home warranty, or can I live without it? It's a reasonable question, and anyone looking to save money will naturally want to avoid adding an extra expense to their monthly budget. But budget-savvy homeowners know that it isn't worth being penny wise and pound foolish.
Yes, you could save a little bit each month if you don’t get yourself a home warranty. But what happens when an appliance breaks down? According to recent polls, homeowners pay anywhere from $250-$700 per appliance to have it fixed. And those are conservative estimates. If you go with the right home warranty service, you can get a year’s worth of coverage for around $300. This covers all of your appliances. So, even if one appliance breaks down, you’ve already covered your premiums.
Of course, if your appliances are all brand new and you aren’t worried about paying out of pocket to have repairs done, then a home warranty might not be necessary. Do the calculations for yourself, and most homeowners come out ahead of the game with a good home warranty service covering their homes.