What's the Difference Between Home Warranty VS. Home Insurance?
I’ve had my fair share of repairs and replacements, but after venting to my friend for the upteenth time about the high out-of-pocket cost for hiring a professional to come get my HVAC system up and running for the summer, she told me about home warranties.
While I had heard about homeowners insurance, I had no idea that there were warranty plans available to help with the cost of covered repairs to my home systems and appliances.
I’ve experienced first-hand how having a home warranty plan can help homeowners, and how I’m ready to share my knowledge with you. Here is everything you need to know about home warranty coverage and homeowner’s insurance to determine which is right for you.
Home warranty vs home insurance
When you first purchased your home, you probably heard the terms ‘home warranty’ and ‘homeowners insurance’ thrown around a lot. Even though these terms sound similar and both provide homeowners with peace of mind, The Balance explained that they are actually utilized for different purposes.
Home insurance is meant to provide homeowners with coverage when an emergency comes up that damages your home, like a flood or fire. These policies cover the interior, exterior and personal property. It can even be used to protect you from theft, vandalism and personal liability.
A home warranty, on the other hand, is a service contract that covers different aspects of your home, typically essential appliances and systems, so in the event they need repair from an unexpected breakdown or normal wear and tear you are financially covered. Contracts are typically on a yearly basis and can be easily renewed for seamless coverage. Value Penguin estimates that the annual coverage fee for plans that cover basic protection starts around $400, but that depends on the provider and services included.
A home warranty plan does not usually require a deductible like an insurance policy does, but instead you are charged a moderate service fee when your home system or appliance needs repair. With a set fee from a licensed and vetted service provider, you won’t be caught off guard with the steep price of repairs.
While both play an important role in protecting your home and finances, the two cover very separate conditions.
Do homeowners need both?
Many homeowners choose to utilize both a homeowners insurance policy and a home warranty plan because they naturally compliment each other. In the home warranty versus home insurance debate, you may find that you could benefit from having both types of coverage.
Who should consider a home warranty?
Home warranties are a great option for first-time homeowners and experienced DIYers alike. Most homeowners opt for a warranty plan because it covers the gaps in home insurance and can mean fewer unanticipated repair costs when an appliance or essential home system needs maintenance. You could also benefit from a home warranty if:
- You’re inexperienced with appliance repair: Tackling an appliance repair if you’re not 100% what you’re doing can sometimes cause more harm than good. Rely on the experts when something needs to be fixed to save yourself the headache (and probably money down the line).
- You have ageing appliances: While new appliances may be covered by the manufacturer's warranty, if you’re thinking long-term, a home warranty is best for covering all your appliances as they age and may become more prone to needing repairs.
- You don’t have the immediate funds to cover the cost of a repair: When an essential home system or appliance stops working, the costs to repair it ASAP can be steep. Having a warranty in place with predetermined coverage terms means you’ll always know what charges to expect.
Read more about how a home warranty can benefit homeowners here.
Who should consider home insurance?
According to Esurance, most states don’t require you to have homeowners insurance if you legally own real estate. However, if you need a mortgage to finance your home (which the majority of homeowners do), many lenders will require you to have at least some basic homeowners coverage before approving the loan. Some other reasons you may need a homeowner’s insurance plan are if:
- You have valuables you need protected: Homeowners insurance covers more than just the interior and exterior of your home, it can help you repair or replace valuable items like heirlooms or expensive jewelry in the event they become damaged or stolen.
- You want to mitigate liability: If you’re worried about someone having an accident and injuring themselves in your home or on your property, homeowner’s insurance can assist you with legal fees if you’re sued.
- You want peace of mind from disasters: Fire, flooding and hurricane damage can all be covered by a home insurance policy. You never know when these events can occur or accidental damage to your property leaves you with a hefty bill, but you can have the peace of mind you’ll be financially covered with insurance.
What does a home warranty cover?
While a home warranty plan isn’t required for purchasing a home, it can save homeowners a lot of time and money in the event an appliance of the home system needs repairs in the future. By paying one low monthly payment each month, you can choose from plans can cover essential appliances and home systems such as:
- Plumbing - An exterior pipe plan covers your water service line as well as your sewer or septic line.
- Heating and cooling - A plan can cover your HVAC system, including repairs to the unit itself or interior ductwork.
- Electrical - Have faulty wiring or flickering lights? An electrical repair plan can help you avoid the shock of covered electrician bills.
- Appliances - Refrigerators, dishwashers, garbage disposals, stoves, washers and dryers are just a few of the appliances a warranty plan can help cover the expenses of when they unexpectedly break or malfunction.
It’s also possible to bundle plans to get the most from your home warranty coverage. For instance, HomeServe, a home warranty company, offers the Home Comfort Plan that covers your heating and cooling systems, gas line and water heater repair and replacement to help you deal with the expense of covered repairs to these essential home systems.
If you’re interested in plans that cover interior plumbing and drainage systems as well your electric line, you may be interested in an Interior Protection Plan.
Where can you buy home warranty coverage?
While home warranties and home insurance are two distinct plans, you may be able to purchase them both from your home insurance agent or broker, according to The Balance. Home warranties are becoming increasingly popular among homeowners who see the value in having comprehensive coverage for their entire property. Some home insurers will offer package endorsements to add warranty features to your insurance policy.
Of course, it’s best to purchase your home warranty from a company that specializes in it. HomeServe has over 15 years of experience in the home repair plan business, and understands what homeowners need.
Plans from HomeServe help alleviate the stress that homeowners can experience when finding a licensed, reliable contractor, getting multiple bids and paying the final bill.
See how plans from HomeServe can help protect you from expensive plumbing, electrical, heating or cooling repairs caused by normal wear and tear that are typically not covered by your insurance.