Home Warranty vs. Homeowner’s Insurance

• Posted on August 17, 2015

If you’re a homeowner, protecting your home and property is always a prime concern. Making decisions about homeowner’s insurance and home warranties can be confusing. What’s the difference, and do you need both? Here are the basics you should know.

What’s the difference between a home warranty and homeowner’s insurance?

Homeowner’s insurance is coverage that will pay for loss or damages that happen in an unexpected event, but only certain kinds of events. The biggest, of course, include theft, weather-related losses, and damage from accidents like a home fire. The circumstances under which your losses are eligible for a claim are specified in your individual insurance plan. In most cases, homeowner’s or renter’s insurance can be renewed as long as you want and as long as the plan continues to fit your needs.

A home warranty is a contract that covers your home’s major systems and appliances should they need repair (or in some cases, replacement) during the contract term, which is usually one year. Unlike insurance, which pays you a dollar amount based on the value of damages, a home warranty sets up a system to actually fix or replace home appliances and systems. Typically, when something breaks, you call the home warranty company, and they contact a third party service provider to set up the repair.

Which systems and appliances are covered will vary from plan to plan, but repairs will only be covered if the system and the cause of failure are specifically listed in your contract. If something breaks because it was improperly installed, for example, the repair may not be covered.

Be aware that many home warranty companies charge fees, similar to deductibles, each time a service provider comes to your home to make a repair. Different companies have different names for it, but it’s usually called a “service call fee” or “service trade fee.” Find a plan that won’t charge you these extra fees.

Do I need both?

It depends. Every homeowner should have homeowner’s insurance (and renters should, too). Home warranty and homeowner’s insurance can work together to provide valuable protection. But a home warranty is not for everyone.

A home warranty will be most beneficial for homebuyers who want to make sure their first year there will not be marred by the stress of unexpected, high-priced repairs. For sellers, having a warranty already in place can be very attractive to potential buyers.

And if you’re building a home, a home warranty can still offer the peace of mind of knowing that if something does go wrong, you won’t be footing the bill. Many builders offer home warranty as part of the building package. Contact us to learn more about Perry’s own top-tier home warranty program.

Always remember to do your research before buying a plan. Make sure the home warranty company is reputable and will follow through on claims. And always make sure you know exactly what is in your contract.

For more information on home warranties or to help you find the right company for your needs, visit www.homewarrantyreviews.com.