Owning a home is the one of the greatest investments you'll make in your life and protecting that investment is crucial. Investing in both a home warranty and a homeowners insurance policy is the best way to protect your home.
Differences Between a Home Warranty and Homeowners Insurance
While home warranties and homeowners insurance both protect your home (and your budget), they do so in very different ways.
- Often purchased with a new home for added budget protection. Can be renewed each year.
- Covers break down of major home systems and appliances.
- Provides for repair and replacement of covered items.
- You pay a service fee each time you request service.
- Has limits and exclusions. For example, may not cover cosmetic defects or damage from misuse.
- Typically required by mortgage lender.
- Covers accidental damages from things like fire or theft.
- Helps pay to repair your home or replace personal property.
- You must meet a deductible on each claim.
- Has limits and exclusions. For example, may not cover damage from earthquakes or hurricanes.
A home warranty is an annual renewable service contract that protects many of the home systems and appliances that you rely on daily. For example, a home warranty can cover your home’s electrical, plumbing, and heating systems, as well as appliances like your dishwasher, stove, refrigerator, washer, and dryer.
When these systems and appliances inevitably fail over time due to normal wear and tear, a home warranty will pay to repair or replace them. You will pay a service fee each time you request service, which typically ranges from $75 - $125.
A homeowners insurance policy is usually required by your mortgage lender to protect the structure of your home against risks such as damage from severe weather, theft, and secondary damages resulting from some system and appliance failures. Homeowners insurance also protects you personally from liability in the event that someone is accidentally injured on your property. Each time you make a claim on your home insurance you pay a deductible cost, which often ranges from $500 to $1,000.
Why You Need a Home Warranty and Homeowners Insurance
Home warranties and homeowners insurance can work together to fix one problem in some cases. For example, let’s say your covered dishwasher broke and caused damage to your floors. You’d rely on your home warranty to take care of the repair or replacement of your dishwasher, and you’d file a claim with your homeowners insurance company for any covered repair or replacement to your damaged floors.