Home Warranty vs Home Insurance In America!

The most confusing thing to deal with when buying a home is trying to figure out if you need homeowners insurance, a home warranty; or both.

Believe it or not: 

These two products are often confused as being the same thing, but they are completely different.

In this post today, I will clear up the confusion of the home warranty vs home insurance battle, as well as when and how to use each product and how to get covered. 

What Is Homeowners Insurance?

Homeowners insurance is simply protection against the loss of your home, for the structures surrounding your home, for your personal property, or for personal liability

While there aren't any state required guidelines when it comes to homeowners insurance, your bank or lender may require you obtain coverage before they issue you a mortgage.

These policies renew on an annual basis and can cost between $300 to $1,500 per year even though the average cost of home insurance is around $1,083 per year.

Every policy comes with a standard homeowners insurance deductible and depending on the company and where you live, could also come with a wind & hail or hurricane deductible.

So, if you need to file a claim, an insurance adjuster will come to your home and fill out a claim form to repair or replace any damaged items.

Once approved, the insurance company will deduct the amount of your deductible and issue you a payment for the remainder of the balance.

Pros And Cons Of Home Insurance

Below we discuss some of the pros and cons to purchasing a home insurance policy:

Pros

• Covers your home from almost any unforeseen disaster
• can cover your mortgage while your home is being rebuilt
• Protects Your Personal Property at home or when traveling
• Offers set monthly premiums and a known deductible for a covered loss
• Perfect for first-time homeowners who are inexperienced with Managing  a home

Cons

• you can't get a mortgage without one
• won't protect you from floods or earthquakes
• premiums can be expensive depending on where you live
• You might never need it, it is possible you will never have to file a claim
• will only cover appliances or electronics if they are damaged due to a covered loss

What Does Home Insurance Cover?

A home insurance policy covers any accidental damage to your home and belongings due to:

• theft
• storms
• fires
• Natural Disasters
• Things Falling From The Sky
• The list goes on and on.

There are five primary areas covered under the policy:

Dwelling Coverage - The physical structure of the home, both the interior and exterior

Other Structures Coverage - Covers surrounding structures of your home like sheds

Personal Property Coverage -  This will cover your personal property in your home or car.

Loss Of Use - This will cover you if your home becomes uninhabitable.

Personal Liability Coverage -  Protects you if a person is injured while on your property.

What Is A Home Warranty?

A Home Warranty is simply protection against the loss of your home appliances due to natural wear and tear. When something stops working in your house or breaks due to wear and tear, or is simply malfunctioning, a home warranty plan is what you will need.

These plans will cover a variety of things like like what we showed above. If your appliance stops working, you simply reach out to your home warranty company and they will send a specialist to assist with your item.

A home warranty will not protect your appliances from external damage inflected on it on purpose or accidentally.

Pros And Cons Of A Home Warranty

Pros

• Provides peace of mind
• Means fewer unanticipated repair costs
• Offers set premiums and a known deductible for repair costs
• Great for first-time homeowners who are inexperienced with appliance break-downs
• Protects major appliances as they age

Cons

• Doesn't cover everything
• Doesn't cover appliances that weren't properly maintained
• You might not ever Use it (like insurance)
• Won't cover damage from fire or other disasters (this is what homeowners insurance covers)

What Does A Home Warranty Cover?

What's covered and how it is covered is going to depend on the home warranty company you decide to go with so be sure to ask for the program specifics before you purchase. 

However, here are some examples of things that might be covered for servicing, replacement or malfunction in a good home warranty program:

• Plumbing
• HVAC systems
• Major Appliances
• Electrical wiring and infrastructure
• contractor or repair services by professionals 
• ceiling fans
• central vacuums
• garbage disposals
• bathtubs with motors
• Jacuzzi, pools, and spas

What Are the Different Options When Choosing a Home Warranty

There are several features available in a home warranty plan to choose from, make sure you ask for all the options then decide which level of service you will need. 

Here are some quick examples:

• A Plan that cover appliances only
• Plans that cover the systems in your home, like the central vacuum, HVAC
• Even Plans that cover appliances and systems
• Add-ons for appliance or systems Like swimming pools, whirlpools, saunas, spas, etc.

Do Home Warranties Have Deductibles?

Just like you can use the deductible to save money on your home insurance, you can choose to take a higher deductible on your home warranty service contract to pay a lower annual fee.

Home Warranty Vs Home Insurance, How Are They Different?

Home warranties and home insurance both cover unexpected situations.  However, the difference is that in your homeowner policy covers items if they are destroyed by a covered loss and a home warranty plan covers things that break down from normal wear and tear.

Home Warranty

When something stops working in your house or breaks due to wear and tear, or is simply malfunctioning, a home warranty plan is what you will need.

These plans will cover a variety of things like like:

• Covers Appliances Inside Of Home
• pays when things break down
• only protects items
• Technicians Fix your appliances
• Central Vacuum Coverage
• Covers Your Pool or Spa

If your dishwasher stops working or malfunctioning, you would want to call your home warranty company to file a claim and get a technician to come out.

Home Insurance

Homeowners insurance is the best defense you can give your family from a natural disaster destroying your home.

Unlike a home warranty plan, your homeowners will only cover your property if it is destroyed by a covered loss and usually covers:

• Personal Property
• Personal Liability
• Medical Coverage
• Loss Of Use Coverage
• Other Structures Coverage
• Structure Coverage

If your dishwasher is stolen during a robbery, or destroyed due to a house fire, call your homeowners insurance company.

Home Warranty Claim vs. Home Insurance Claim

In this scenario, your dishwasher breaks down leaking water on the floor and through the ceiling of your basement getting the walls soaking wet and damaging your furniture and floors. 

While your home insurance might cover the water damage to the basement and your floors, it will not cover the cost of your dishwasher breaking down.

Your home warranty plan will kick in to cover the broken down dish washer. 

A homeowners insurance plan will cover your home and personal property, your home warranty plan will cover appliances and things like air conditioners.

Take Action

Hopefully you now understand what home warranty vs home insurance actually means and you are ready to get covered. If you haven't started the search, you should check out our Hippo Insurance Review for home insurance