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Home Warranty Vs Home Insurance

Home Warranty Pros And Cons: What To Know

Home Warranty vs Home Insurance Explained | American Home Shield

When it comes to protecting your house or rental, you have multiple options – from home insurance to security alarm systems to home warranties.

While home insurance is usually required by the mortgage lender and security systems can be pricey and burdensome to install, home warranties are simple, reliable and relatively inexpensive. A home warranty can cover the repair costs of common household items and appliances. If applicable, it could also fully replace the item in question.

If you already don’t have one, it’s something every homeowner or renter should contemplate getting. Not sure about pricing or if you’re in the market for a home warranty? Find out today with a few quick and easy steps.

Like any home expense, there are pros and cons to this unique form of protection. Here are a few to be aware of.

It’s probably worth keeping your peace of mind intact by securing a home warranty now. You can easily put one in place today.

This is not an exhaustive list. There are other pros and cons to home warranties that may be specific to your home, rental, appliances and individual preferences. First, determine the coverage you need. Then think about the additional coverage you may benefit from. Finally, reach out to find out how to put a warranty in place.

What Is Home Warranty Insurance

As a homeowner, youre responsible for covering the costs of repairing and replacing everything from the roof to the refrigerator. The good news is, thanks to homeowners insurance add-ons like equipment breakdown coverage, its easy to protect the things you work so hard for.

But before you can be confident in your protection, you first need to understand the difference between a home warranty and equipment breakdown coverage. Lets take a look at what each covers so you know how to select the right coverage for your home.

Deductibles And Service Fees

Home warranties and home insurance usually require an upfront fee to claim the policy. Home warranties charge a service fee when you call them for a repair. Then, home insurance policies often charge a deductible when you make a claim.

The service fee or deductible amount is listed in your contract with the warranty or insurance company.

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Homeowers Insurance Pros And Cons

Pros

  • Covers damage from weather, fire, theft, vandalism, and other external forces

  • Usually protects you from liability

  • Can use any service provider or repair company you wish

  • Reduces your costs if an accident or catastrophic event occurs

  • Cannot be transferred if you sell the house
  • Does not cover items that break down due to age or wear and tear
  • Must pay a deductible before insurance will cover damage
  • Does not cover flood or earthquake events

How Does Homeowners Insurance Work

Home warranty vs. home insurance: What

Homeowners insurance has nothing to do with the folks you bought your home from, and you cant use it to cover the cost of a dishwasher that randomly decides to stop working . Because it exists to shield you from post-catastrophe financial devastation, you may never even need to use it .

If you do, the first step is to contact your insurance company and file a claim. Then, an adjuster will investigate and determine whether the claim is covered under your policy and, if so, your financial entitlement.

Payment will be received via check , and you can use the funds to make the repair in any way you see fit. You can hire the contractor of your choice, you can DIY it or you can even pocket the money and let the damage languish. It is all up to you.

Some situations that might result in the filing of a homeowners insurance claim include:

  • A tree falling on your house
  • Damage from severe weather
  • Fire and smoke damage

Note that these are all specific events that lead to home damage, rather than a description of the damage itself.

TIP: Most policies do not cover things like earthquakes or flood damage. If you want those things covered, youll probably need to pay extra.

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Home Warranty Vs Homeowners Insurance: How Much They Cost

Both home warranty and home insurance policies come with premiums you have the choice of paying monthly, quarterly, or annually. They also come with a deductible, or the amount of money you have to pay out of pocket before the company kicks in to cover the rest. However, how much bang youre getting for your buck varies between the two types of policies.

How Does A Home Warranty Work

Even the best home warranty is useless if you never use it, so if something in your home breaks down, contact your warranty company right away to discuss the problem and to verify coverage.

If the repair is covered, the company will send one of their partner technicians to your home to make the repair . Be forewarnedyour pre-paid fees may or may not be your only out-of-pocket expense. Some companies charge service fees above and beyond the monthly or yearly premiums.

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Questions To Ask About A Home Warranty Before You Buy

When you’re shopping around for warranties, it’s important to ask questions to ensure you fully understand what is covered and if there are any limitations. If you need some help figuring out exactly what to ask, here are some starter questions:

  • Are there limits for each coverage?
  • Are there certain parts of covered appliances that are excluded?
  • Can certain conditions cause a covered appliance to become uncovered? Some plans exclude older appliances or appliances that aren’t subject to regular upkeep and maintenance.
  • Are there maximum amounts payable?
  • What are the deductibles?
  • What kind of service calls are covered?
  • Is there a limit on how many service calls I can make?
  • Is there a charge to have a professional come and assess whether something is covered or not? Some warranty plans charge service fees in addition to your deductible.
  • Do you have to use the company’s network of contractors and service people, or can you choose your own?
  • What is the process to make a claim, and how will you be paid?
  • Is there a waiting period?
  • How does the company interpret preexisting conditions?
  • What kinds of damages are excluded? Ask for examples to make sure you understand the range of coverage. Many situations can have tricky restrictions or limitations, especially with electrical and plumbing.

What Doesnt A Home Warranty Cover

Home Warranty vs Home Insurance – What’s The Difference?

Home warranties specifically cover damage that occurs as a result of everyday use. Home warranty providers reserve the right to deny coverage based on insufficient maintenance.

Accidental damage, damage caused by improper installation or modification and pre-existing conditions are also often excluded from coverage. However, some companies, such as American Home Shield, cover unknown pre-existing conditions that cant be detected via a simple mechanical test or visual inspection.

With that said, home warranty providers will typically allow you to read the service agreement before signing up for a plan. Youll want to take extra time to read through the sample agreement thoroughly so that you are aware of any possible exclusions or limitations of your policy.

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What Does Homeowners Insurance Not Cover

Unfortunately, homeowners insurance doesnt cover all possible catastrophic events. Flood and earthquake protections, which are considered acts of God, are reserved for separate policies.

Like home warranties, homeowners insurance policies are subject to coverage caps, which means that the insurance provider will only pay up to a specified amount outlined in the coverage agreement. All other costs beyond that coverage limit will be the responsibility of the homeowner.

Compare Homeowners Insurance Policies

Home Warranties Vs Home Insurance

If you’re looking to avoid unexpected and potentially pricey home expenses, then you’ll want to carefully consider home insurance and warranties. If you’re a current homeowner, there’s a good chance you already have home insurance – and a warranty may come later. Before you can decide on what you need, it’s important to understand the difference between the two.

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Home Warranty Pros And Cons

Pros

  • Covers appliances and systems that break down due to wear and tear

  • Can reduce your home repair costs

  • Typically transferable if you sell your house

  • Can be customized for your needs

  • Can only use certain approved service providers
  • May not cover items that break down due to poor maintenance
  • Doesn’t cover damage to your home’s structure or liability
  • May be dollar amount caps on certain repairs
  • Must pay a service fee for all repairs

Home Warranty Vs Home Insurance What Are The Differences

Homeowners Insurance vs. Home Warranty [Video]

Warranty and insurance are both words that encompass some form of protection for people who purchase them. However, when it comes to protection for your home, these two words are very different. Every homeowner needs to understand the differences between home warranties and home insurance for many reasons.

Home Warranty of America works with homeowners around the United States, and we make sure to explain the differences between these two layers of protection. Were going to provide some brief examples below of what home warranty vs. insurance really means in day-to-day life.

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Home Warranty Vs Home Insurance: Heres What You Need To Know

Home warranties and home insurance both offer protection for your home, but they offer different types of protection for different parts of your home. This is why many Hello Covered customers use a combination of both types of policies to create a custom protection plan that helps them live at ease.

How Much Is Homeowners Insurance

A home insurance policy is usually mandatory, and a bank will generally require you to obtain one before issuing a mortgage on a home. In terms of typical homeowners insurance cost, the policy is renewed yearly, and its average annual cost is $1,312 though, this cost varies widely from state to state. All home insurance policies offer a deductible, which you’ll pay when your claim is approved. The policy will then take care of any additional costs. Of course, youll want to do your research when it comes to home insurance comparisons, as different home insurance companies offer different rates and deductible requirements.

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Do You Need A Home Warranty If You Have Home Insurance

People may be offered home warranty coverage when they buy a new home. Although both home warranties and homeowners insurance can cover emergency events, and each provides you with a reduction of repair expenses, the two products have their differences.

Your homeowners insurance policy is not a home warranty. Whether you’re a first-time or experienced homebuyer, you should understand what a home warranty covers. This can help you decide if you should purchase one in addition to homeowners insurance.

You Can Transfer The Home Warranty To The Next Owner

Desert Schools Federal Credit Union: Home warranty vs. home insurance

Whenever you move into a new home, you need to purchase a new home insurance policy or update your existing one. However, you can transfer or take on a home warranty plan when you buy or sell a property.

Providing the home warranty might act as an additional incentive for buyers as a seller. This can reduce the buyers worry that appliances or systems might break down the second they move in.

As a buyer, you might want a home warranty with your home purchase because youve depleted your savings, and you dont have enough to tackle unexpected costs.

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What Protection Does A Home Warranty Offer

A home warranty covers the cost of repairs and replacements of certain appliances and systems in your home caused by everyday wear and tear, or from old age. Examples of appliances and systems that may be covered in a home warranty plan include:

  • Hot water heater

There are other parts of the home that a home warranty covers, but every specific plan is a bit different. The bottom-line difference with regards to warranty vs. insurance is that insurance covers unexpected events that lead to damage, while warranties cover events that are somewhat expected, such as the aging and ultimate breakdown of appliances and systems.

While individual appliances may initially be covered under manufacturers warranties, these only last a predetermined period of time. Home warranties provide protection regardless of the age of the appliance or system.

Watch our video for an easy-to-understand overview of the issue of home warranty vs. home insurance that specifically delves into the types of coverage and protection each offers.

How Home Warranties And Insurance Work Together

Its pretty simple, actually. Home warranties protect you from things you know will happen eventually. Home insurance protects you from things that you might not expect to happen. With home warranties and home insurance combined, you can be assured that your home, and home life, are fully protected from the known and unknown.

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What Is The Difference Between A Home Warranty And Homeowners Insurance

There are a lot of similarities between a home warranty and homeowners insurance. With both policies, you pay a monthly fee and a service fee, also known as a deductible in the insurance industry. The biggest difference between a home warranty and home insurance is what they cover.

Many homeowners erroneously assume that their home insurance will cover all unforeseen expenses and liability associated with homeownership. In reality, its reserved for events such as a natural disaster, fire or burglary what are called perils in insurance parlance. A home warranty protects your major appliances and systems in the event they malfunction due to normal wear and tear. Some home insurance policies may cover appliances and built-in systems, but these policies often come with a high deductible.

In many ways, a home warranty policy supplements the gaps of homeowners insurance. As an example, a home warranty may cover the repair or replacement of a broken water heater when its worn out from years of use, whereas you may file a claim with your homeowners insurance if your water heater explodes, has a major leak or causes some form of structural damage.

Neither home insurance nor home warranties are legal requirements of homeownership. However, your mortgage provider may require that you enroll in a home insurance plan at the time you buy a home.

Final Thoughts On Homeowners Insurance And Home Warranties

Home Insurance vs Home Warranty

Youre a responsible person. You want to protect your home and be smart with your money. On paper, it seems like having comprehensive homeowners insurance coupled with a robust home warranty is the most surefire way to ensure youre protected from whatever life might throw your way, but when you start looking at the details, warranties tend to become a little less attractive.

Were not going to say they are totally without value, but for most folks, home warranties can end up being a waste of money. The peace of mind is nice, but you may be able to achieve the same by building up a healthy emergency fund. Just some food for thought.

The other piece of that peace-of-mind puzzle is robust homeowners insurance. If youre in the market, be sure to check out our guide to the best homeowners insurance providers on the market today.

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Home Warranty Vs Home Insurance: Whats The Difference

Comparing a home warranty to home insurance comes down to one main distinction. Home warranties cover your homes internal components such as systems and home appliances in the event of damage from everyday wear and tear home insurance covers damage to your personal property and the structural integrity of your home caused by major events including natural disasters, burglary and vandalism.

For the highest degree of home protection, its a good idea to enroll in both a home warranty and homeowners insurance. If youre looking for a home warranty provider, read our review of the best home warranty companies in the nation. If youre looking for a top-notch home insurer, read our roundup of the best homeowners insurance companies.

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Home Warranties May Pay When Home Insurance Won’t

Imagine you have a home inspection and reconstruction cost evaluation done by your homeowners insurance company. The company discovers that a flickering light might mean the wiring needs work. Your insurance company tells you it is a potential fire hazard, and the asks you to do repairs to keep your insurance policy in force. Since there has been no accident, no sudden damage, nor any accidental damage, the homeowners insurance policy will not pay for repairs or regular maintenance.

It’s nice to have everything covered, but remember that the more that is covered, the more you’ll pay in premiums.

After you get off the phone with your insurance company, you contact your home warranty company. It sends a professional to look at the situation because you bought a good servicing contract with many add-ons and coverage for the electrical wiring. The electrician identifies the source of the problem and what needs to be done. Your warranty company covers the cost of the necessary repairs, allowing you to keep your insurance policy without dipping into your pocket.

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