Insurance

How To Differentiate Between Home Insurance and Home Warranty

How To Differentiate Between Home Insurance and Home Warranty

Home Insurance and Home Warranty

One might well be wondering just what distinction is between a home warranty and home insurance if you own or intend to purchase a property. Admittedly, both protect your home, your wallet—in the event that something unexpected happens. Home warranties and home insurance plans, on the other hand, provide different levels of support. Understanding what each one entails can assist you in determining whether you require both.

What Is a Home Warranty and How Does It Work?

A home warranty is a service agreement that assists to cover the costs of repairs and replacements for eligible household equipment and systems. You get a fixed amount on service calls in exchange for a monthly or yearly fee.

If a covered appliance or system fails, your home warranty company dispatches a specialist to examine and remedy the fault, and you only pay the service call charge. Such packages have coverage limitations: A contract might pay up to $1,500 per year for each piece of qualified equipment, with a claim limit of $15,000 per year.

If you get a home warranty as part of a real estate transaction, it normally kicks in immediately you seal the house deal. If you purchase a warranty for a home you already own, however, you may have to wait 15 to 30 days for coverage to begin.

What Is Included in a Home Warranty?

Appliances and systems in both new and pre-owned homes are covered by home warranties. The majority of house warranty businesses provide three different types of plans:

  • Plans for appliances (washer/dryer, dishwasher, and refrigerator, for example)
  • Plans for the System (e.g., HVAC, plumbing, and electrical systems)
  • Plan of Action (everything included in the appliance and system plans)

Numerous providers allow you to add coverage for specific items that aren’t covered by the regular policies (for a charge). Pools, spas, septic systems, wells, lawn sprinkler systems, and additional appliances are also common “add-ons” (e.g., a second dishwasher or air conditioner).

What Is the Price of a Home Warranty?

The value of a home warranty is determined by two factors:

  • A fee that is paid on a monthly or yearly basis: This is the cost of getting discounted service calls. You might pay anything from $350 to more than $1,100 per year, depending on where you reside and the plan you purchase.
  • There is a service charge: This is the fee you pay each time you need a covered appliance or system repaired. Most providers have numerous “levels” of service fees, which can range from $55 to $150 per service call. The lesser the service price, the greater your monthly or yearly fee will be in general, and inversely.

What Is Homeowners Insurance and How Does It Work?

Home insurance (sometimes known as homeowners insurance) is a form of property insurance that covers losses and damages resulting from covered dangers. A conventional homes insurance policy, according to the Insurance Information Institute (III), comprises four types of coverage:

  1. Insurance for the home’s structure: If your residence is damaged or destroyed by a covered risk, this pays to renovate or reconstruct it. Additional buildings on the property, like garages, tool sheds, decks, and gazebos, are usually covered by most policies.
  2. Insurance for Personal belongings:  If your furniture, clothes, sports equipment, and other personal possessions are stolen or destroyed as a result of a covered risk, you are insured. If you have valuable stuff, you may need a floater or a particular personal property endorsement to guarantee you’re properly covered.
  3. Liability insurance:  Liability insurance protects policyholders, their family members, and their pets from lawsuits for injuries and property damage they inflict on others.
  4. Increase in Expenses of living:  If your home is left in ruins due to a listed risk, this coverage pays for motels, meals, and other living expenses.

What Is Covered by Homeowners Insurance?

The HO-3 policy, which protects your home, goods, and liability, is the most popular home insurance coverage.

An intentionally created electrical current causes unexpected and unintentional damage.

Personal liability for injuries to others (those who do not live with you) and their property while on your property is also covered by homeowners insurance. Dog bites, house accidents, falling trees, inebriated guests, and wounded domestic employees are among the most common liability claims.

How much does it cost to insure a house?

According to a 2019 survey from the National Association of Insurance Commissioners (NAIC), the average home insurance premium for owner-occupied homes is $1,211.  An individual may pay more or less contingent on considerations like where you reside, the cost of rebuilding your home, the value of your personal items, the size, features, and condition of your home, the deductible and coverage limits you choose, your home’s size, features, and condition, your history of home insurance claims, and your marital status and credit score.

Dogs are another factor that can affect the cost of homeowner’s insurance. If you have a “dangerous” dog breed, your insurance premiums may rise, and dog liability coverage may be omitted.

Conclusion

Home warranties are optional and they assist in covering costs when an appliance or major household system breaks down. However, Home insurance covers your home and personal belongings against theft and other perils and provides personal liability coverage.

The Author

Oladotun Olayemi

Dotun is a financial enthusiast who specializes in first-in-class financial content, including crypto, blockchain, market, and business, to educate and inform readers.