How is a home insurance plan different from a home warranty?
Homeowners insurance as well as home warranty are basically designed to help homeowners, if the home or belongings of the homeowners are affected by loss or damage. In case of a home insurance policy several things including the home structure, personal belongings, as well as other structures are covered, if the loss or damage is caused by covered factors or perils. Eg: A home insurance policy can provide for damages caused to the covered structure of the house in the case of a hail storm bombarding the city and area. Homeowner's insurance is deductible and may have different or variable rates. So a person has to pay the deductible amount before the insurance company pays for the damages. The rates for the policies may increase for future terms and the premium may increase after the homeowner files a claim. But this is not always the case, the rates could remain the same.
A home warranty is basically a contract that offers repair as well as replacement of the home appliances along with other systems that are covered under the warranty. Such coverage is available for items that fail because of normal wear and tear. Eg: If the air conditioner or other appliance stops functioning because of normal use, then the home warranty covers such a loss. However, it is important that the appliance covered under the home warranty plan is in working condition before the purchase of the contract. A home warranty carries a service charge; so if an appliance covered by a warranty breaks down because of normal wear and tear then the homeowner is required to pay the service charge to the service professional. Any remaining costs associated with repairing or replacing the appliance is covered by the warranty company. The premium associated with home warranty may not increase because a claim was filed but it may be hiked upwards if the service cost and other related factors increase.
Compare Home Insurance Coverage to a Home Warranty
| Event or Item | Homeowners Insurance | Home Warranty |
|---|---|---|
| Covers Structure in case of wind damage | Covered | Not Covered |
| Stolen Personal Property | Covered | Not Covered |
| Injury of 3rd person or your property | Covered | Not Covered |
| Appliance breakdown from normal wear and tear | Not Covered | Covered |
| Heating system component breakdown | Not Covered | Covered |
It's important to understand that homeowners insurance does not protect heating and air system or appliances from breakdowns. You need to purchase a separate policy with a home warranty company to help cover household items.
That is why a Home Warranty is the perfect solution for items that a homeowners insurance policy will not cover. Having a home warranty can help protect your finances when large expenses occur do to breakdowns from appliances, heating and air systems and even experior damage.