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As home warranties become a more popular investment for homeowners across the United States, many people previously unfamiliar with the service are wondering how home warranty coverage compares to traditional homeowner’s insurance. Understandably, homeowners are reluctant to purchase a home warranty if coverage will overlap with their existing insurance policies.
Home warranties and homeowner’s insurance operate on a similar principle, but they otherwise have little in common. If you already have insurance, you can purchase a home warranty without worrying about paying for redundant coverage. Let’s take a closer look by comparing a typical home warranty vs. home insurance policy.
Let’s begin with homeowner’s insurance. This is a policy to protect your home and belongings from damage that occurs in certain circumstances. While it’s not necessarily a prerequisite for homeownership, virtually all homeowners have insurance. Other than insurance being a plainly good idea for something as expensive as a house, many banks will not provide a mortgage unless the homeowner presents proof of insurance.
While the terms of insurance policies vary, standard coverage protects your home, other structures on your property, and your personal belongings. They can also cover liability for damage to someone else’s property. A policy will pay only in certain circumstances, however. Standard insurance policies cover damage or losses sustained by the following things:
Some policies provide coverage in the event of an earthquake, flood, or other natural event, but this usually costs extra. Insurance will not typically repair or replace your belongings if they are damaged from general use.
Home warranties are sometimes referred to as home warranty insurance, but this is a bit of a misnomer. A home warranty isn’t an insurance policy in the strictest sense of the word. It’s more appropriately described as a service contract.
The homeowner pays a premium, just as with an insurance policy. In return, the warranty provider will arrange to have a technician visit the home to service, repair, or replace any appliances or systems that are covered by the warranty.
Unlike insurance, a home warranty doesn’t usually cover the overall structure of the home. Instead, it provides coverage for home systems and appliances. A typical home warranty can cover the following:
The above is not an exhaustive list. A home warranty can protect virtually anything. It can even provide home services, such as carpet cleaning, re-keying, and pest control.
And here’s a critical difference when comparing a home warranty vs. homeowner’s insurance: A home warranty will cover items that malfunction due to general wear and tear.
Most home warranties will not cover items that are damaged from misuse or abuse, and they will not usually cover personal property lost to theft or natural disasters. After all, that’s what homeowner’s insurance is for!
In researching warranties and insurance policies, you may also come across appliance warranties. These may or may not be synonymous with home warranties. Here’s why.
Many appliances, large or small, have a manufacturer’s warranty. These can last anywhere from a couple of months to several years. They are essentially a company’s guarantee that their product will work properly for a certain amount of time. Sometimes, “appliance warranty” may actually refer to the manufacturer’s warranty.
Once the manufacturer’s warranty is expired, you can get a home warranty from a third party for extended coverage. So, some people may use “appliance warranty” to refer to a service contract or home warranty on a specific appliance.
Hopefully, you’re no longer left wondering, “how is home warranty different from home insurance?” If you have any lingering questions, or just want to further investigate getting a home warranty to fully protect your personal property, you can speak with our team at (833)-544-8273.
A home warranty and appliance warranty are similar policies. People sometimes even use the terms interchangeably. So, which one is for you? In this article, we’ll give you the information you need to make the right decision.
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