The Differences Between Home Insurance and Home Warranties (and Why You Need Both)

Buying a home is incredibly expensive, and maintaining that home is equally costly. Not only do you have to save up for a down payment and a monthly mortgage payment, but you need to pay for monthly utilities, regular home and yard maintenance, updating projects and more. Then, on top of all that, you have to pay for products that keep your home safe from disasters — like home insurance and home warranties.

In an attempt to cut back on expenses, many homeowners decide to cut out their home warranty, believing it to be superfluous coverage — but that is far from the truth. Read on to learn how home insurance and home warranties differ, and why you probably need to invest in both types of coverage if you want your house to stay safe and secure.

Home Insurance Covers Unexpected Catastrophes

The best way of describing what home insurance covers is that home insurance protects you financially when something unexpected occurs on your property. For example, you would have no way of predicting that a freak hailstorm in July is going to punch baseball-sized holes through your roof; similarly, it is impossible to know that your aunt will trip over a tree root in your backyard and break her wrist. In some places, where certain types of natural phenomena are common — like earthquakes in Los Angeles or tornadoes in Kansas — homeowners do need to seek additional insurance coverage to protect them from damage due to these causes. Still, homeowners insurance is vital for keeping investments safe from the unknown.

Home Warranties Cover Predictable Decay

In contrast, you know for certain that time will not be kind to your property. Age is particularly harsh on certain components of a modern home; systems that function often, if not constantly, will experience high amounts of wear and tear that will eventually necessitate extensive repairs if not replacements. Though you can’t predict when a system will break down, you should know that it will happen within a definite period. Home insurance doesn’t cover expected malfunctions and break downs — but home warranties do. If you have a home that is older than about 15 years, you should invest in a home warranty to protect your investment from looming repairs and replacements of old and outdated systems.

Home Insurance Covers Anything Damaged in Your Home

When your home suffers unforeseen damage, there is no telling what in your home will be damaged. For instance, a fire could obliterate your patio and kitchen but leave your living room and bedrooms untouched; a burglar could nab your television but leave your laptop and jewelry behind, and a tree limb could miss your home entirely but crush your visiting neighbor’s leg. Because neither homeowners nor insurers can say for certain what will need repair or replacement after a catastrophe, essentially anything that is damaged inside your home will be covered — to include people visiting your property if you have a liability policy.

Home Warranties Cover Specific Features

Everything suffers the ravages of time, so you might be wondering: What does a home warranty cover in your home? Unlike homeowners insurance, home warranties are quite specific in the systems that receive their protection. Basic policies tend to include the HVAC system, water heaters, plumbing, electrical and standard large appliances (like refrigerators, ranges, washers and dryers). Yet, unlike most home insurance policies, home warranties are much more flexible and capable of including additional systems if you so desire. You might include protection for your roof, your pool and spa or your lawn sprinklers. Depending on what is getting old and requiring more attention, your home warranty policy can change.

You pay homeowners insurance and home warranties similarly: on a monthly or annual basis. However, when you use your home warranty, you pay a flat service fee and receive a comprehensive checkup from an expert in your area. Meanwhile, homeowners insurance tends to compensate you for any repairs you need on your property, which can be a significant financial burden until your insurance check comes through.

Homeowners insurance and home warranties function much differently, which is why it is all but imperative to have both. If you need more information about either insurance or warranties, you can contact a provider in your area.