A significant cost that comes with home owning is the maintenance upkeep, you want to keep your systems inside safe as well as the appliances and personal belongings! If you have find
yourself asking "why do I need BOTH?!" Well, they both keep your investments and checkbook safe. Here we will talk about the difference between a home warranty and homeowners insurance and the benefits and costs of both!
What is a Home Warranty?
A home warranty is a service agreement designed to assist with the cost of repairing or replacing covered appliances and home systems. To access this coverage, homeowners
typically pay either a monthly or annual fee, and in return, they receive a fixed, predetermined rate for service calls. So as you can see its not quite like home insurance. If your covered appliance or system fails or needs repairing your home warranty company will send out a professional to service the system for you and you only pay the service call fee. There can be limits to the coverage that will be in your contract. Your home warranty is not required unlike insurance and there are different plans you can typically choose from to determine which plan is the best fit for you.
What is my Home-Owners Insurance?
Your Homeowners Insurance is a type of property insurance that protects against serious losses and damages. Unlike your home warranty, your insurance isn't typically optional and in certain cases can be required by your loan officer. There are 4 main categories that are considered your essential types of coverage; structure, personal property, liability, and additional living expenses.
Coverage:
We have now discussed the key differences between the two. Now let's talk about what each typically can cover(this can all differ based on your personal coverage type).
As mentioned, your home warranty typically covers appliances and home services. There will usually be multiple plans you can choose from differentiated by what it covers and how much the cost will be. You have your appliances that include your washer, dryer, refrigerator, dishwasher, etc. Next is your systems which include your HVAC, plumbing, electrical, etc. Depending on the plans offered will determine what is included in yours.
We are now going to talk about the four different sections that can be included in your home insurance.
Personal Belongings: this will include items such as your furniture, clothes, jewelry, etc. The coverage of these items will depend on your plan but can include theft and covered damages.
Liability Protection: This covers incidents where lawsuits can come up when someone is injured by the policyholder, their family, or their pets.
Structure Of The Home: This pays for the repairs or damage done to the structure of a covered occurrence, where you may have to repair or rebuild.
Additional Living Expenses: This will pay for meals, hotels, etc. if your home is deemed unlivable due to a covered occurrence.
How is cost determined?
Your home insurance cost is determined by many factors such as:
● Location of the home
● The value of your personal property
● Your home's features such as age, size, condition, etc.
● The specific deductibles and coverage you choose
● Your personal history with insurance claims
● Your credit score and marital status
● Certain types of pets you own
As you can see there are a lot of factors that can determine how much you pay for your home insurance. It can be helpful to shop around and see who can give you the best deal. As for your home warranty there are 2 main factors that you should look at when it comes to cost.
Your annual or monthly fee: This is the initial cost you pay once a year or monthly to get the discounted service calls. This cost will differentiate depending on what plan you get, when you get it, and where you live.
Your service fee: This is the fee you pay when you make a needed service call under your covered items. A service call includes diagnosing and repairing your system or appliances. The lower your service call amount is, the higher your monthly or annual fee will be.
When do you need both?
As you can see at this point they cover different aspects to protect your home. That being said, they do complement each other. Having both ensures you are protecting the most amount of aspects of your investment. While keeping in mind, choosing a plan will still affect what's covered.
My final thoughts:
As said before your home warranty helps cover your appliances and service repairs and breakdowns. Your home insurance covers your personal property from covered occurrences, also to include personal liability coverage. If you are financing the home your lender might require home insurance on your home. Even if they don't, it is always a great idea. While your home warranty is optional it might be a good idea for you, if you want peace of mind, your appliance and systems are not covered by their personal warranty anymore, or if any of them would be expensive if they were to break. It is important for you to read your contract before signing with a company and speaking with multiple companies to see who you can get the best deal from. You want to make sure what is going to suit you the best and be worth your money.
I hope this helps you differentiate the two and choose the best options that suit your needs!
