Home Insurance vs Home Warranty

Feb 18, 2020 | Personal Insurance

Confusion

What are the documents needed when purchasing a new home? This is one of the greatest investments in life, so we have to make sure that the money being spent is secured considering that there are circumstances that we couldn’t avoid like natural disasters, fire, etc. 

So what is a home warranty? What is home insurance? What differentiates the two? What is their coverage? 

Which is which?

A home warranty is always offered when buying a new home. Although it is not required, it is a smart purchase to have as well as home insurance because both of them gives the homeowner peace of mind. It offers different types of protection so knowing what the difference is will help you understand and decide if you are going to obtain both of it or if one of them is good enough for you. 

A home warranty is a service contract that provides repair and replacement of your system components and home appliances caused by normal wear and tear. Homeowners Insurance (HOI) pays for damages and loss caused by unexpected events such as fire and weather damage, but it won’t help if your washing machine breaks down. Components of your HVAC, electrical and plumbing, kitchen appliances, central vacuums, garbage disposals, ceiling fans, and washer/dryer are typically covered under this warranty. You can also include larger systems like Jacuzzi, pool or spa. Home warranties typically have 12-month contract terms and are not mandatory to obtain a mortgage. So if a system or an appliance in a home breaks down, instead of calling a repair company they call their home warranty company. And all the homeowner has had to pay for is the service call fee and yearly premium. 

Since HOI is required for obtaining a house, understand that there are cons to home warranty. (1) That it doesn’t cover everything; (2) it doesn’t cover appliances that weren’t properly maintained; (3) there is a yearly payment required and you may end up not using it; and (4) it won’t cover damage from a fire or other disasters because that what an HOI covers. 

Which do I need?

The question is, since home insurance is a must-have for buying a home, does doing the same thing by obtaining a home warranty will be worth it? Do you have to get both? 

First of all, you have to understand that both of them have a different offer. Home insurance is always required right after buying a house; a bank usually requires for you to get one before issuing a mortgage on a home. Home insurance covers any accidental damage to your home and belongings due to theft, storms, fires, and some natural disasters. The scope of insurance under the policy includes four primary areas: the (1) interior and (2) exterior of your home, (3) personal property in case of theft, loss or damage, and (4) general liability that can arise when a person is injured while on your property.

Further clarification

For instance, one of the rooms in your home is on fire. Homeowner’s insurance will pay for the damage caused by the fire. When it comes to fire damage, Insurance will also cover for belongings that were ruined. However, there are fire damages that home insurance may not cover such as starting a fire in your own home or an act of war. To understand better, it’s best to contact your local agent and learn about the risks that are excluded from the coverage. For safety precautions, it is best to have smoke detectors and fire extinguishers to help protect yourself from fire. 

There are incidents that only service contracts like home warranty can fix. This is where a homeowner’s insurance and home warranty can be tricky. For example, pipe leaks and floods your toilet. HOI will cover it but the repair and replacement of the toilet would not be covered. A homeowner will have to pay for it if they didn’t have a home warranty. A home warranty will cover for a plumber to come and fix the plumbing system. But if the home floods because of a plumbing problem, a home warranty won’t cover the damage caused but home insurance will!

Conclusion

Confusing? Yeah, it pretty much is confusing.

Why purchasing both is the best way?

Because homeowners need to protect the structure of the house, together with the system components and appliances. One cannot fix it without the other because it has different coverage for every structure and parts of the home. They work in different ways but its goal is to protect every part of your home.

We’re here to help!

So, if you need anything from home insurance, home warranty or anything else in between, just contact us today and we’ll get you straightened out. We’re the advantage you need to get you, your property, your family or business protected.