The Difference Between Home Insurance and a Home Warranty

Your home is an important asset that people want to protect, so having both home insurance and a warranty is a good thing. Both of these can be helpful if an emergency strikes, but they are very different policies.

Home Warranty

A home warranty is there to help you out if repairs, and sometimes replacements, are needed for certain key areas of your home. This is an elective service that you are not required to purchase. If you buy a brand-new home, a warranty may be offered as a perk through your realtor, though it may be limited to the HVAC, plumbing, and electrical systems without options for add ons.

Some will cover everything from electrical, stove, oven, plumbing, appliances, HVAC systems, and other equipment; if you have a pool or hot tub, they can be covered by this. When you set up your home warranty you can choose exactly how much coverage you need. A good way to think of a warranty is as “a service contract that provides for repair or replacement of your system components and appliances that fail due to age and standard wear and tear.”

A warranty covers your home appliances, even as they age, which insurance will not cover; it can be helpful if your refrigerator randomly breaks down, especially if you do not have room in your budget to go buy a new one. Like insurance, they will not cover appliances that broke down due to negligence, and you have to pay a monthly premium for a service you may never use. Unlike insurance, a warranty will not cover damage from a fire or disaster.

Home Insurance

Insurance will protect your home from disasters like hurricanes, fires, along with theft, vandalism, and other things that are explained in your policy. It can also protect you if a visitor is injured while on your property. Having a home insurance policy is usually required by a mortgage lender.

It does not cover the dishwasher breaking down, but it may cover the damages to your home from the dishwasher breaking down, depending on your policy, and if the damage is greater than your deductible.

Do I Need Both?

The insurance is required, but the warranty is elective, so you do not have to have both. However, having both means you are covered for more things. That broken dishwasher can get repaired by your warranty and the water damage it causes can be covered by your insurance, meaning there is less you have to pay out of pocket for the repairs. This can be helpful in the long run, especially if you have an older home where things may need repairs or are not able to keep money set aside to repair broken appliances.

If owning an older home is part of your reasoning for getting a warranty, make sure you go over everything that will be covered before you sign up. Some warranties will not cover anything that is over 10 years old, and others might exclude important things like the refrigerator.