Home Warranty Vs. Home Insurance: Which One Do You Need?

When buying a home, you must do deep research on all aspects of homeownership. One of the many things you’d have to figure out is how you can best protect yourself as well as your property should something go amiss. 

Two products can help keep your investment safe and sound: home warranties and home insurance. Both are essential to your peace of mind, but which one do you really need?

What’s the Difference?

Both home warranty and home insurance offer some level of protection to a home from costly repairs. They may be similar in many ways, particularly with how a homeowner uses them. However, they’re not the same thing. Here’s what you need to understand:

Home Warranty

Home warranty companies like American Home Shield provide a service agreement that covers repairs or replacement of household appliances or systems that malfunction because of age and normal wear and tear. Your laundry and kitchen appliances as well as electrical and plumbing systems may all be covered under a home warranty plan.

When you buy a home warranty plan, you will pay a premium to a home warranty company. Most of them offer different packages with various premiums, which depend on the breadth of services offered. Generally speaking, a home warranty plan premium may cost between $25 and $50 per month, or from $300 to $600 per year. You also need to pay a moderate service call fee for each service. This fee can range anywhere from $75 to $125, which you may pay directly to the technician. 

If you have a warranty plan and an appliance or system at home breaks down, you just have to contact the home warranty company instead of calling a repairman yourself. If the malfunctioning device or installation is covered under the warranty plan you purchased, the company will send out a qualified repair technician to get the broken machine up and running again.

Getting a home warranty plan is not mandatory. Also, they’re often available as 12-month contract terms.

 Home Insurance

If you have a mortgage on your home, you will be required by your lender to buy home insurance. It’s a form of property insurance that will cover losses as well as external and interior damages to your residence. These include furniture and other personal belongings in your property. Home insurance also grants liability coverage in the event that someone else is injured while on the property.

The policy’s liability coverage has limits, though. It determines the amount of coverage you will have only in the event that an accident or unfortunate event occurs.

If you buy home insurance, you will have to pay an annual premium to your home insurance company. Depending on the policy you purchase, the premium can run from $300 to $1,000 every year. When something is lost or damaged due to theft or natural disaster like a storm, you just have to contact your insurance provider to file a claim. The company will then send you a check, provided that the cause of loss or damage is covered under your policy.

In many cases, you will have to pay a deductible to the company. This is the fixed amount of money you need to pay before your insurance provider pays you any money toward a claim. The deductible can range between $100 and $2,000. In general, the higher your deductible amount, the lower your annual premium will be.  

In Conclusion

The main difference between a home warranty and home insurance boils down to their source of damage. A warranty plan covers routine wear and tear. On the other hand, an insurance policy only kicks in once a bona fide emergency occurs due to external forces. 

As a homeowner, you need both policies. Not only do you require protection against damage to your home appliances and systems, but you also legally need to protect your home’s structure and assets. If you own a house, think about getting both a home warranty and home insurance, as they tend to work well together in providing assurance about every part of your residence. Just keep in mind that both policies carry deductibles as well as limitations and exclusions. Ensure that you carefully read through a policy’s terms before sealing the deal.


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