A home warranty and home insurance are two types of home protection policies that you can get for your property. However, these policies cover different things, so it’s important to understand the key differences and know how each type of coverage can work for you to provide maximum coverage.
What Is a Home Warranty?
A home warranty is a type of insurance policy that can cover the repair or replacement of home appliances and systems. It’s important to note that this type of insurance policy only covers damage due to old age and normal wear and tear.
What types of appliances do home warranties cover?
The major appliances that home warranties typically insure are refrigerators, washers, dryers, oven ranges, furnaces, and water heaters. They also cover whole-home systems, including HVAC systems, plumbing, and electrical systems. We recommend you click to read more about home warranties for appliances to help aid your decision-making process.
Home warranties typically don’t cover appliances or systems that are still under a manufacturer’s warranty. So, if your hot water heater breaks while still within the original 5-year warranty period offered by the manufacturer, you will have to reach out to the manufacturer to get it repaired or replaced.
What Is Home Insurance
Home insurance, also known as homeowners insurance, covers accidental damage and loss. For example, it can help pay for repairs to your home’s structure caused by things like fire or flooding or pay to replace damaged or stolen property.
Home insurance policies can also come with liability insurance, which helps pay legal fees or medical bills if someone has an accident and gets injured on your property. So, if someone slips and falls on your front walkway and has to go to the hospital, your homeowners’ insurance can cover this, for example.
What homeowners insurance doesn’t cover
Home insurance policies do not pay for repairs or replacement of appliances and systems if they are required because of defects or normal wear and tear. These cases are only covered by home warranties or manufacturer warranties.
In order to cash in on homeowners insurance, the damage or loss has to be completely accidental. Damage and loss from things like earthquakes, fires, floods, storms, and break-ins are all usually covered by your home insurance policy.
Five Tips for Using Home Warranties and Homeowners Insurance
- Home warranties are more optional
If you take out a mortgage or any type of loan to purchase a home, the lender will require you to have homeowners insurance until you pay off the debt. On the other hand, a home warranty is a completely optional, “extra” type of insurance that can cover some gaps in your home insurance policy.
- Home warranties and home insurance complement each other
Imagine your plumbing system breaks and causes water damage on the ground floor of your home. A home warranty would cover the plumbing repairs, but it wouldn’t cover the water damage — but homeowners insurance would. This is how both types of policies work together to provide maximum coverage.
- Every insurance policy is different
Not all home warranties cover all types of appliances and systems, and not all homeowners insurance policies cover all types of accidental damage and loss. Not only that, but every policy has different limits for the amount of money you can claim. That’s why you should always read the fine print carefully and work with an insurance agent to find the best coverage for you and your home.
- You can add things to home warranties
If you have non-essential systems and appliances, you can often purchase added insurance for them on a home warranty. For example, basic home warranties don’t usually cover things like pools, spas, and hot tubs. So, if your home has any of these, you would want to purchase a warranty that covers them.
- Homeowners insurance doesn’t always cover mold
If your home has mold, it’s something that you want to take care of right away. However, home insurance policies usually only pay for mold remediation if it is due to a specific problem covered in the policy, such as water damage from broken plumbing. Homeowners insurance usually doesn’t cover mold removal and repairs if the mold was caused by a leak that you didn’t fix for a long time, bad repairs or construction, or normal wear and tear on your home.
The Bottom Line
So, now you know what the difference between a home warranty and home insurance is, and you should understand that they are not mutually exclusive. For the best home protection, it’s ideal to purchase both a home warranty and a homeowners insurance policy. You might not think you need all that coverage now, but you’ll be glad you have it when you make a big claim!
