Homeowner’s Insurance Vs Warranty – What You Need To Know
Whether you’re a first time home owner or you’ve had your property for decades, home ownership is a big deal. Even so, it’s not uncommon for even the most seasoned property owners to still have homeowners insurance questions about their specific policies, warranties, or insurance in general as new risks arise and old ones stop being as relevant. You might also wonder whether you should get homeowners insurance, rely on a warranty, or have both… it’s also important to know what warranties you have and the details that come with them.
When questions arise, you need to get your answers from qualified specialists so you can make changes to your policy as needed and make sure that your home is adequately covered, wherever it matters the most.
What is Homeowners Insurance?
Considering a home is one of the biggest investments you’ll ever make, homeowners insurance is one of the smartest decisions you’ll ever make. Homeowners insurance doesn’t just cover the house; it covers everything on the property. That means detached structures such as a shed, a gate, and your detached garage. It also covers your belongings, including clothing, electronics, and even that prized leather couch / recliner set you got a great deal on. Homeowners insurance will cover you in the event that somebody injures themselves at your house and decides they want to sue you. It will even cover the cost of temporary living expenses if your home becomes unlivable during repairs or rebuilding due to unforeseen circumstances.
What is a home warranty?
A home warranty is similar to homeowners insurance in that it covers the costs of repairing or replacing your home’s major systems and appliances, but the difference is it only lasts for a specific amount of time, usually around 1 year. It’s also not as comprehensive as insurance, as it usually only applies to one or a small group of items.
Basically, both a homeowners insurance policy and a home warranty will cover you for certain things and mitigate the risk of a huge financial burden. However, insurance is much more comprehensive and long lasting. It should be noted that a home warranty is in no means a replacement or substitute for homeowners insurance, for that reason. But that doesn’t mean you should completely forgo warranties, however.
Having a home warranty can cover some gaps that are left in your homeowners insurance policy, and it can provide you with an additional layer of protection for certain expensive repairs. So you don’t have to choose one or the other, and in fact having both can give you a huge advantage.
Your mortgage insurance lender will probably require a certain amount of homeowners insurance, but your policy probably wont cover things like burst pipes, or damages that are incurred due to normal wear and tear or a preventable accident. So while a warranty isn’t a requirement or as necessary as homeowners insurance, it can definitely be an extremely useful thing to have. Otherwise, you may want to consider more comprehensive coverage in your homeowners insurance policy.
What Does a Home Warranty Cover?
The mechanical systems and appliances in your home have a lifespan. They’re not designed or built to last forever, and when a system or appliance breaks, the cost to repair or replace it can be an unexpected financial burden. A home warranty reduces the risk of getting hit with a big-budget item by providing service, repair, or replacement due to normal wear and tear on major built-in household appliances and systems.
Most home warranties cover appliances like dishwashers, ovens, and refrigerators (but not always the ice maker). They also generally cover major systems including HVAC, plumbing, and electrical. Many home warranties provide optional add-ons to cover systems that not everyone has, such as pool pumps, septic tanks, and well pumps. You can also purchase “cafeteria plan” home warranties that only cover certain items. Don’t expect a home warranty to cover cosmetic defects, such as a scratch on your stainless steel appliance.
A home warranty covers exactly what’s included in the contract. So, when buying a home warranty, read the fine print and be sure that the systems and appliances you’re concerned about are listed as covered assets.
Should I Buy a Home Warranty?
A home warranty is typically a one-year service contract with a warranty company that covers the service, repair, and replacement of major home systems and appliances. Anyone who owns a home can benefit from a home warranty because these contracts are designed to reduce the risk of unexpected big-budget expenses.
You should consider a home warranty if your HVAC system is nearing the end of its useful life. These systems can be very expensive to replace, and a home warranty can ease the financial burden if your heating, ventilation, or air conditioning system breaks. A home warranty is also helpful to cover older appliances, especially if the manufacturers’ warranties have expired.
If your appliances have active manufacturers’ warranties, a home warranty won’t cover them. And if your appliances and home systems are newer, or if you’re able to fix mechanical problems yourself, a home warranty might not be necessary.