Mishaps and accidents are a part of life. Incidents can occur in your home that may lead to damage or loss. Unfortunately, you could even be on the wrong end of an emergency or a disaster. These events can be stressful or devastating. You never know when something like this will happen, so preparation is critical. Knowing the difference between a home warranty vs home insurance will be beneficial.
Protecting what you value can help spare you from financial ruin. This is why when you buy a home you must get homeowner’s insurance. It provides protection in case of a fire, flood or other unforeseen event. Yet, a home warranty also gives similar peace of mind but the two are not the same. It’s helpful to understand how these protective financial devices are different and when each will come to your aid.
What Can Happen?
When it comes to keeping your home safe and sound, there are some steps you can take to minimize your risks of loss or damage. Still, some problems are unavoidable and come despite your best efforts to prepare or plan against them.
Fires are among the most destructive catastrophes. A blaze can destroy your belongings and even wipe out your home. Even minor damage can make your home unlivable. Water damage from leaky or bursting pipes can require costly cleanup. Other hazards such as high winds, violent storms, lightning, and falling objects can cause damage to your home as well as theft and vandalism can also occur.
Some problems may not be from disasters but are simply untimely. The sudden breakdown of an appliance or system in the home can be inconvenient. Even the wear and tear of these appliances can cause stress.
When to File Insurance and Home Warranty Claims
Homeowners insurance protects you when a disaster or catastrophe does happen. You can make a claim for damage or loss when an incident affects your home.
In contrast, a home warranty can cover repairs or replacement when an appliance or system breaks down due to age or defect. It will also be valid if the item simply stops working unexpectedly.
A Warranty Is Not Required
When you buy a home and secure a mortgage, you will need homeowner’s insurance. However, a home warranty is not mandatory. This is a voluntary purchase that you can make at any time. You do not need to have this plan at all, and you can even have it sporadically throughout your homeownership if you wish.
A Home Warranty Covers Damage to Specific Item
Homeowners should understand what both of these benefits cover. Both will protect your home from damage, but these work in different ways. A home warranty will pay to fix the broken item itself but not for damage that it also causes.
For example, if your old fridge has sprung a leak due to its many years of use, your warranty will take effect on the fridge. You can make a claim, and the warranty company will send a technician to your home to fix or replace the fridge. However, the warranty will not cover damage that has occurred in your home due to the leak. If the flooring needs to be replaced, the warranty can’t help with that. However, your insurance policy may be able to provide some financial help with this matter.
Differences in Costs
Both plans require that you pay an annual premium. Note that a home warranty typically costs less. You can find plans as low as $300, though some may go up to $700. Your homeowner’s policy can run up to $1,000 a year or more.
Your insurance policy will have a deductible — an amount you must be paid for a claim before the coverage kicks in. This figure can vary from a few hundred to more than $1,000. A home warranty has similar costs, but again, the amount will usually be less. When you make a claim and the warranty company sends a technician, you will need to pay a service fee. A service call fee is between $50 and $150 in most situations.
You can’t predict when an emergency or breakdown may occur in your home. If you are prepared with a homeowner’s insurance policy and a home warranty for your Texas home, you will be protecting your finances while maintaining your property. Thus, the two are different, one is critical and the other can be helpful.