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Insurance is Different From a Home Warranty, Here’s How

So, you bought a house. Now, the next important step is protecting the assets within the home.

The best way to do this is to purchase two things: a homeowners insurance policy and a home warranty.

Here’s the biggest question homeowners are asking: isn’t homeowners insurance the same thing as a home warranty?

(Spoiler alert: they’re not the same thing.)

Let’s dive into the distinguishing factors between the two. By the end of this article, you’ll know how a homeowners insurance policy protects a home and what a home warranty covers.

What is Homeowners Insurance?

Homeowners insurance is a form of property insurance.

This insurance covers losses and damages to an individual’s home and the assets inside of the home. This insurance policy includes interior damage, exterior damage, and loss or damage of personal assets and belongings.

Homeowners insurance also provides liability coverage against accidents in the home or on the property.

Think about it like this: if there were a disaster, most people wouldn't be able to afford rebuilding their home. Homeowners insurance protects homeowners from that cost.

When you think of what might damage a home, earthquakes and hurricanes may come to mind. Years ago, insurance companies did cover hurricane damage. But, after Hurricane Andrew in 1992, payouts from hurricane damage put some insurance companies out of business.

Now, homeowners insurance policies cover damage caused by fires, lightning strikes (like Cheryl’s she shed), windstorms, and hail. But, damages from earthquakes and floods are not typically covered by homeowners insurance.

When a mortgage is requested on a home, homeowners are required to provide proof of insurance on the property. A lending bank will want to see proof of this before issuing a mortgage. Generally, monthly mortgage payments include the cost of a homeowners insurance policy.

The cost of homeowners insurance can depend on several factors. The location of the home for one thing, and that’s mostly due to the differences in state laws, since insurance is regulated state by state.

What’s Covered by a Home Warranty?

A home warranty is a service contract that protects home systems and appliances. This is optional coverage homeowners can purchase – it is not required.

A home warranty can cover complete home systems like:

  • Air Conditioning & Heating with Ductwork
  • Electrical
  • Doorbells
  • Smoke Detectors
  • Ceiling Fans
  • Plumbing
  • Water Heaters
  • Garbage Disposals
  • And more

Or, specific appliances, like:

  • Refrigerators
  • Ranges/Ovens/Cooktops
  • Clothes Washers
  • Clothes Dryers
  • Dishwashers
  • Built-in Microwave Ovens
  • Trash Compactors
  • Freestanding Ice Makers
  • Garage Door Openers
  • Built-in Food Centers
  • And more

Customizable plans that include both home systems and appliances are generally available for comprehensive coverage. Oftentimes, there are options for add-on coverage, too, like if you have an additional refrigerator in the garage, a guest house, or if you want coverage for the pool.

A home warranty, otherwise known as a home service contract, includes the cost to repair or replace the item in exchange for a small service fee. If problems with the home system or an appliance arise from normal wear and tear, homeowners can rely on their home warranty company to dispatch a contractor to diagnose and fix the problem – whether that’s a clogged-up toilet or a dishwasher that’s flooding the kitchen.

A home warranty protects you from paying for expensive new appliances. As long as it’s covered in the home warranty contract, the appliance will be repaired or replaced.

A home warranty contract usually has 12-month terms and the cost of a home warranty depends on what the plan covers. Gathering home warranty quotes is an important first step in selecting the right home warranty plan.

Get Protected, Stay Protected

Buying a home is one of life’s largest investments. And, normal wear and tear happens – the circumstances of which are not always predictable, in fact they rarely are. Adequate coverage from homeowners insurance coupled with a home warranty plan means when life does happen and things break – because things will break – you and your family will be protected.