Home Warranty vs. Home Insurance

Home insurance and home warranties are both designed to protect homeowners from financial loss due to unexpected events or damages to their property. However, there are significant differences between the two that homeowners should be aware of.

Home Insurance: Home insurance is a type of insurance policy that covers damage or loss to the structure of your home and its contents. It typically covers a range of perils, including fire, theft, vandalism, and natural disasters such as hurricanes and earthquakes. Home insurance is often required by lenders when you take out a mortgage to purchase a home.

Home Warranties: Home warranties, on the other hand, are service contracts that cover the cost of repairing or replacing major systems and appliances in your home that fail due to normal wear and tear. This includes things like your HVAC system, plumbing, electrical, and kitchen appliances. Home warranties are optional and can be purchased at any time, even after you've owned your home for a while.

Differences: One of the main differences between home insurance and home warranties is what they cover. Home insurance covers damage or loss to the structure and contents of your home, while home warranties cover repairs or replacements of major home systems and appliances. Additionally, home insurance is typically required by lenders, while home warranties are optional.

Another difference is in how claims are processed. Home insurance claims are typically filed after a covered event occurs, such as a fire or theft, and the insurance company pays out a predetermined amount based on the policy limits. Home warranty claims, on the other hand, are filed when a covered system or appliance fails due to normal wear and tear, and the warranty company sends out a technician to assess the issue and make repairs or replacements as needed.

Finally, the cost of home insurance and home warranties also differs. Home insurance premiums are typically based on the value of your home and the amount of coverage you choose, while home warranty costs are based on the level of coverage and the specific systems and appliances you want to cover.

In summary, while both home insurance and home warranties offer homeowners protection against unexpected expenses, they cover different things and have different requirements and processes for filing claims. Home insurance is required by lenders and covers damage to the structure and contents of your home, while home warranties cover repairs and replacements of major home systems and appliances and are optional. It's important to carefully review your options and determine which types of coverage are best for your specific needs.