Countless individuals believe a home warranty is the same as homeowners insurance. To be covered against various perils, you pay a premium and a deductible for each covered event under each policy. However, the two policies cover different things.
Understanding the similarities and differences between the policies allows you to determine what coverage you need and in what amounts. Homeowners insurance covers you from a natural disaster, theft, or fire. The home warranty, in contrast, covers major appliances and systems in the home from malfunctions due to normal wear and tear.
The home warranty covers many gaps seen with homeowners insurance policies. Homeowners aren’t required to buy either policy currently. However, many mortgage lenders require homeowner’s insurance because they have an interest in the property.
Look at a home warranty as a service contract, much like you can purchase when you buy a new appliance for the household. The warranty will fix a covered appliance or system if it breaks from normal wear and tear. If it can’t repair the appliance or system, the warranty provider replaces it.
You may like knowing you won’t have an unexpected repair or replacement bill. The warranty company covers the cost after you pay the deductible and is responsible for finding a reputable contractor to do the work. File a claim immediately when problems arise with a covered item to ensure the company will cover the repair or replacement.
Home Warranty Coverage
Each provider offers different coverage from a home warranty they sell. However, all provide coverage for multiple appliances and built-in systems. Most warranty companies offer several plans, including ones that only cover the bare basics and those that cover most household appliances and systems. The buyer must read the fine print found in each contract to know what the policy excludes and what limits come with it.
Common items covered include your microwave, dishwasher, washing machine, and garbage disposal. The heating and cooling system, electrical system, and water heater are also typically included in the coverage. You can add to a policy if you own other items, such as a central vacuum or sump pump. Speak to each provider to learn which systems are covered and which ones you may purchase add-on coverage for.
What is Excluded From Your Home Warranty?
If an item has not been properly maintained, the home warranty provider will not pay for repairs or replacement. Any damage or malfunction that occurred before the warranty was purchased will not be covered either. The same holds if the damage is the result of the item not being installed properly.
Most mortgage lenders require a borrower to carry homeowner’s insurance until the mortgage is paid in full. This coverage protects the actual home and its contents, up to the amount listed in the policy. In addition, most policies provide some coverage for injury and personal property liability.
What Does the Insurance Policy Cover?
The insurer will pay to have the home repaired or rebuilt following a covered peril. Covered perils might include theft, smoke damage, a house fire, or weather damage. In addition, the policy covers additional living expenses if a person is unable to live in their residence following a perilous event. Medical expenses might also be covered for those living in the home or their guests in certain situations.
Homeowner’s Insurance Exclusions
A homeowner’s insurance policy won’t cover all perils. Separate coverage is needed for acts of God, such as earthquakes and floods. In addition, the policy won’t pay for damage caused by normal usage. Finally, the policy only pays up to the coverage cap or limit. Anything above this amount is the responsibility of the homeowner.
As a homeowner, you bear responsibility for every part of the property. Caring for the residence and grounds can be costly. With the help of homeowner’s insurance and a home warranty, you can keep these costs down.