Home Repair Showdown: Warranty vs. Insurance
Which type of coverage best protects your home and its contents? The answer may surprise you.
OK, so it’s not actually a showdown. In fact, home warranties and home insurance policies almost never really go head to head because they fill separate needs. If you’re a first-time home buyer, however, terms such as warranty, premium and deductible can be confusing. Here’s a guide to the two types of coverage that can help with your home repairs.
Similarities
Both a home warranty and a home insurance policy can help replace or repair a part of your home or its contents. Warranties and home insurance policies also have deductibles, so you’ll have to pay a certain agreed-upon amount before your coverage kicks in.
Differences
Typically, home warranties and home insurance don’t overlap. Here’s why.
When they’re applied: Home insurance policies take effect after certain events, often called covered perils. For example, for damage caused by wind, hail, fire or lightning, you would turn to your home insurance policy to help repair or replace your house or its contents. On the other hand, a home warranty repairs or replaces covered components in your home when they break from normal wear and tear or age.
What they apply to: Have a washer that needs fixing? You’d probably use your home warranty for that. Warranties replace or repair the major systems (such as electrical and plumbing) in your home, along with appliances such as your refrigerator or oven. Although some roofs do carry warranties, most home warranties cover mechanical systems.
Conversely, if the structure of your house or its contents are damaged by a covered peril, you would turn to home insurance, which also safeguards certain aspects of your home life. Home insurance helps pay to protect you against lawsuits for injuries that occur on your property, for example, and reimburses your living expenses while your house undergoes repairs.
How they apply: Think of your warranty as tied to your house and its unmovable systems. Your electrical system can remain protected by the warranty even if you move before your contract ends. On the other hand, your home insurance is tailored to your home and to you. Insurance providers base premiums and coverage on a variety of factors, including house characteristics, personal characteristics and location.
Test your knowledge
Think you now understand the difference between a home warranty and a home insurance policy? Choose the right coverage to deal with each situation below.
Your pipes freeze and burst in a winter storm: To deal with damage to your home or pipes in this situation, you would turn to your home insurance policy. Remember, home insurance only covers water “from above,” or water related to falling rain or pipes. Standard policies typically exclude flooding. If your pipes leak because of normal wear and tear or clogs, however, your home warranty would take center stage.
Your old refrigerator stops running: As long as your fridge doesn’t fail because of a power outage or a storm, this appliance would receive coverage under your home warranty. Check the manufacturer’s warranty as well.
Your microwave sparks a fire that damages your kitchen: To deal with the fire’s destruction, you would claim the damage through your home insurance policy. Your provider also can help you get back on your feet by contributing toward your restaurant and hotel bills while your kitchen undergoes repair.
The winner?
In this case, there is no winner. As a homeowner, you almost always use a home warranty and a home insurance policy in different situations. The obvious answer for someone moving into a new home: purchase both. They’ll help you settle in worry-free in no time.
