Home Warranty Versus Home Insurance
If your plan is to buy a house and live in it a long time, then it is necessary to plan for when things go wrong because they will. At some point, you will have to make repairs to the house itself or the appliances inside of it. The question is whether you will make those repairs at a time when you’re flush with cash or at the worst time possible? Taking steps to protect yourself from these inevitabilities can help you put some sort of predictability back into the equation. There are a few different tools that exist for homeowners that can help cover the inevitable unforeseen circumstances, such as home warranties and home insurance. However, it is important to understand that all of these tools are not the same. A home warranty is not a homeowners insurance policy, so what are the differences?
What are Home Warranties?
Home warranties vary from company to company and contract to contract, but there are some standard things you can expect from most. Typically, a home warranty will cover important systems in your house and appliances for a set timeframe for a set fee. Systems typically covered include things like HVAC, indoor plumbing, duct work, etc. Appliances typically covered include things like refrigerators, dishwasher, ovens, stovetop, etc. Different appliances and systems are included/excluded based on the particularities of the warranty. Some home warranties will cover a refrigerator, but will not cover the standing ice maker portion of it. The cost of home warranties vary, but can range from $300 for basic coverage to more than $600 for more comprehensive coverage.
Differences Between Home Warranty and Home Insurance
Homeowners insurance is designed to protect your house and its belongings from damage caused by a named peril, such as fire or storm. On top of that, a standard homeowners insurance policy usually offers some type of liability protection. Liability coverage would protect the policyholder if exposed to a lawsuit from your property, such as a neighbor hurting themselves on your stairs. As you can see, this is very different from a home warranty. Your standard house insurance coverage makes sense even if your appliances are not covered. Homeowners insurance remains in force as long as the policy premiums are paid and the policy is continuously renewed. Home warranties expire after a set date. The threats your homeowners insurance protects you from never expire. Fires and storms do not have an expiration date, so neither should your protection.
Homeowner Considerations for Home Warranties
At best, home warranties work in conjunction with home insurance and do not replace homeowners policies. However, before deciding that a home warranty is something you would want to go along with your homeowners insurance policy, there are some things to consider. First, beware of the improper maintenance clause. This is a piece of fine print that is found in most home warranty contracts that can be used to exclude coverage. If an appliance or system breaks because of improper maintenance, it is not covered by the home warranty. Second, figure out what kind of replacements you would get if one is necessary. Would you get the same appliance? An equivalent? How is that determined? This is important if you are particular about your appliances and their features.
Final Thoughts
Getting a home warranty when you buy a house can give you peace of mind if you worry about having your honeymoon interrupted by broken appliances. However, a home warranty is not the same as house insurance and does not replace a homeowners policy. At best, you need both. Although, there are many homeowners who do not believe a home warranty is necessary. While repairs and replacements are inevitable, some homeowners like to control what types of replacements they get. Instead of buying a home warranty, some homeowners opt for a saving plan to create a repair fund for the house. That way whenever repairs need to be made, they can be done to the specifications of the homeowner.
Regardless, it is important to do your own research to decide if a home warranty is great for you. Only you can decide if they are worth the cost or if you would prefer to pursue your own emergency savings strategy. If you want help deciding what type of coverage is right for your homeowners policy, then you need an insurance professional. Most insurance carriers offer a range of coverage options that go well beyond a standard homeowners policy. Some of these optional coverages, include things like equipment breakdown, which might give you some of the protection you’re looking for. If you want to know the range of coverage options available to you, contact us. The professional insurance brokers at Streamline Insurance are here to make sure you have the right coverage for your needs and your budget.
