Understanding the Difference Between Homeowners Insurance and Home Warranties

As a homeowner, you have invested a lot of time and money into your property. Yet the problem with any investment is that you’re always one bad day away from losing it all, through no fault of your own. In addition to large-scale disasters such as fires, floods and storms, your house is at constant risk of falling victim to the never-ending march of time. No matter how well-maintained they are, the crucial elements of your home such as the furnace, washer/dryer combo or water heater can simply become too old and worn-out to soldier on like they did before.

When it comes to protecting their investments, the majority of people know to purchase homeowners insurance. Although this gives them peace of mind in most catastrophic situations, this may lead to a false sense of security. That’s because they might be under the impression that their policies will bail them out if their appliances stop working. This may be true under some circumstances, but not all. This is why it’s a good idea for anyone who owns a house to purchase a home warranty in addition to insurance.

What follows is some basic information about home insurance vs. home warranty coverage and why both are good ideas.

What Does Homeowners Insurance Cover?

Most people are familiar with the basic concept of homeowners insurance. Typically, a policy will cover the costs to repair or replace something on or in the house that was damaged or stolen. This means it covers natural disasters, fires and theft.

However, this coverage only extends to those types of situations. It may not provide protection in the event that anything stops working due to regular wear and tear. In other words, it may replace your washing machine if a tree crashes through your laundry room during a storm, but not if a drive belt snaps in the middle of a load.

These policies also can offer property owners liability coverage. This means the insurer may pay for legal or medical bills incurred by a homeowner if someone is injured on the premises.


What Does a Home Warranty Cover?


A home warranty differs from an insurance policy in the fact that it provides coverage when appliances and other important systems fail due to normal wear and tear. Nothing lasts forever, but this can give the owner of a house confidence that he or she won’t need to pay for repairs or a replacement entirely out of pocket.

These range from basic plans to extensive coverage. They may include home appliances, HVAC systems, plumbing and other elements in or on the property. The level of coverage provided depends on the options offered by the company and the consumer’s choice. In some instances, however, a home warranty may not cover certain items already covered by a manufacturer’s warranty.


How Does a Home Warranty Work?


Whenever anything covered by a warranty fails due to age or malfunctioning, the homeowner can file a claim. Many times, the provider will contract with a particular service company to provide repairs. It will arrange for the technicians to be dispatched to the house and fix whatever needs fixing.

In some instances, the warranty provider may supply payment or reimbursement toward a replacement. Whether the decision is to repair or replace, there may be limitations on how much compensation the homeowner is entitled to receive.


Why Are Home Warranties and Homeowners Insurance Different?


Although both provide help to residents when something unexpected happens, they aren’t interchangeable. Having one does not mean you can get away without the other. This is because insurance policies are mainly concerned with protecting policyholders from damage or theft. They don’t consider something that breaks down in the regular line of duty to be deserving of coverage.

A home warranty, on the other hand, won’t help if an air conditioner is struck by lightning or damaged by a flood. Instead, it will bring experienced repair professionals right to the property if that vital piece of equipment suddenly stops working.

On the surface, these two options for protection might appear to be identical. However, they each are capable of giving homeowners peace of mind in different ways. This is why it’s recommended that anyone who owns a house should consider having both to ensure they will be covered no matter what happens to their investment.