When it comes to protecting your home, there are several options available, but the two most common ones are homeowners insurance and home warranties. These two can easily be confused for one another or their importance overlooked entirely. However, understanding these home protection services and their coverage goes a long way in making informed decisions concerning your home welfare. This article will delve deeper into the differentiation between home insurance and home warranties, their coverage, significance, and a few considerations to make when selecting the right service for your needs.
Home Insurance Overview
Homeowners insurance, commonly referred to as home insurance, is a type of property insurance that covers losses and damages to one’s house and other assets in the home. Home insurance policies typically encompass four primary areas: interior damage, exterior damage, loss or damage of personal assets, and harm that occurs while on the property.
The policy often includes financial protection against disasters such as fire, theft, or certain types of severe weather like hurricanes or tornadoes. It also provides liability coverage in case someone gets injured on your property and decides to sue. However, all is not gloomy. You can usually customize your coverage to fit your needs, including extras that extend beyond the usual policies.
Home insurance will often require payment each year – in the form of a premium – and usually has a deductible. The latter is the amount you agree to pay out of your pocket before your insurance coverage begins. When an incident occurs, this insurance can help cover the cost of repairing or rebuilding your home, replacing your personal possessions, and covering the cost of living elsewhere while your house is under repair.
Home Warranty Overview
Unlike homeowners insurance, a home warranty is a service contract that helps cover the cost of repairing or replacing appliances and systems in your house like electrical, plumbing, heating and cooling systems. It is essentially a protection plan for your appliances.
A home warranty helps you keep things running smoothly in your home, especially when general wear and tear start to take a toll, which isn’t generally covered by homeowners’ insurance. So if your garbage disposal, furnace or even your spa tub breaks down, it might be covered under your home warranty plan. However, be sure to read the fine print, as there might be exceptions and exclusions.
Home warranties typically have a term of one year and renewable after every year. They carry an annual premium, as well as a service fee (commonly known as a deductible), payable per repair or service, which is often less than the cost of a single major repair.
The Significant Differences Between Home Insurance and Home Warranties
Essentially, the main distinction between homeowners’ insurance and home warranty boils down to what each covers.
Homeowners insurance caters to damages caused by external factors such as fire, thunderstorms, or theft. It also includes injuries that occur within the property bounds.
On the other hand, a home warranty plan is an annual service contract that provides for the repair or replacement of core home system components and appliances that fail over time due to regular wear and tear.
Which One Should You Choose, Home Warranty or Home Insurance?
As a homeowner, you may naturally ask yourself, “Should I choose a home insurance plan or a home warranty?” The answer is not necessarily one or the other. Ideally, it should be both.
While both home insurance and home warranties provide important coverage benefits, they usually don’t overlap in the areas they cover. Home insurance is generally mandatory, especially if you have a mortgage on your home, while a home warranty is optional, but they both serve a complementary role.
Having both provides comprehensive coverage for your property. If a storm damages your home, homeowners insurance may pay for repairs. And if your fridge breaks down due to wear and tear afterward, a home warranty could possibly cover the replacement.
Key Takeaways
While home insurance and home warranties offer different types of coverage, they work together to completely protect your home, belongings, and budget. Home insurance may be required, especially if you have a mortgage, but home warranties, although often overlooked, offer crucial protection when home systems and appliances break down due to wear and tear.
When choosing home insurance or a home warranty provider, consider the cost, what’s covered, how easy it is to make a claim, and reviews of the insurer or warranty provider’s service. If you value peace of mind and convenience, selecting both will provide the most robust protection of your home.
Ultimately, remember, the best protection is finding the right balance between home insurance and home warranties – and making sure you have both in place can put you in the best position to handle whatever comes your home’s way.