What’s the Difference Between Home Insurance and Home Warranty

Insurance and warranty are terms that both describe some kind of protection for individuals who buy them. However, when it comes to protecting your home, these terms mean two different things and it’s smart for homeowners to understand the difference between them.

Owning your home is among the biggest investments you will make in your life. Protecting your assets is an integral and wise move. The best way to do that is to buy both home insurance and home warranty plans. Buying both will cover your home, possessions, appliances, and systems when they need repair or replacement. However, understanding the difference between these two products and why you require them can be difficult. Below are some examples of what home insurance and home warranty mean in everyday life.

Home Insurance Vs. Home Warranty: What’s the Difference?

The primary difference between home insurance and a home warranty is pretty simple. Homeowners insurance protects your home from disasters like adverse weather, fallen trees, theft, smoke, or fire. On the other hand, a home warranty covers the cost of repairs or replacements of home appliances and  home systems when they break down over time due to normal wear and tear. The coverage of a home warranty plan can possibly save you hundreds of dollars. It can also save you the stress of finding a reliable service provider to make the repairs.

In simple terms, home insurance protects against events that can damage the structure of the home, while a home warranty protects against breakdowns with appliances and systems in your home.

What Is Home Insurance?

A home insurance policy protects against any accidental damage to your home and possessions due to fires, storms, theft, and other natural disasters. The various areas covered under this policy include the exterior and interior of your home, personal belongings in case of robbery, damage, loss, and the liabilities that might arise when an individual is injured when on your property.

Home insurance is often compulsory. Your bank will typically require you to get one before giving a mortgage on a new home. The policy is renewed every year, and its price ranges between $300 and $1,000. Home insurance policies have deductibles, which is the amount you will pay in case of a claim. The coverage will then pay any extra costs.

For example, a tree falls on your house and damages part of the roof. An insurance adjuster will visit your home and file a claim for the replacement and repair of any damaged items. After the claim gets approved, the insurance company subtracts the amount of your deductible and pays for the rest of the balance to repair your house. The deductible can also help in reducing your annual premiums. A higher deductible means that your annual home insurance premiums will be lower.

What Is a Home Warranty?

A home warranty policy covers repairs or replacements of major appliances and systems that break down due to normal wear and tear and age. For example, components of your washer/dryer, kitchen appliances, plumbing, electrical and HVAC systems are covered by home warranty plans. They can also cover roofs and pools. 

A home warranty policy usually has annual contract terms and is not compulsory to get a mortgage. It is purely optional, but it is an excellent purchase. Home warranty plans can be bought for around $300 to $600 per year, with additional coverage for pools and roofs.

For instance, your air conditioning system breaks down. In such a case, an independent contractor will come to your home to assess the issue. If it is concluded that the system stopped working because of normal wear and tear or age, and the damage is covered under your contract, the contractor will repair or replace the system or appliance components for only the cost of their services. A typical service call will cost you between $50 to $150 based on the amount you choose when purchasing your policy. But if you were to replace the unit on your own without a home warranty plan, that can cost you $5,000-$10,000.

Get Both: Home Insurance and A Home Warranty

As a homeowner, both home insurance and a home warranty plan can protect your property and your home appliances and systems. If there is damage to your home’s structure, you will not have to pay the high repair costs from the damage and if a home appliance or system breaks down or malfunctions, a home warranty can help cover the expensive repairs or replacement. Just make sure you look at reviews and pick the best home insurance and the best home warranty in California. If you have a home, consider buying both products to ensure your home gets full protection.

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