Have you tried to know the differences between a home warranty plan and home insurance? Both investments intend to protect the homeowners from paying costly repairs but what do they cover? Do you need both home insurance and a home warranty plan or you can simply manage by having one? These are popular questions most homeowners often ask. Let’s take a closer look at what a home warranty is and what home insurance is.
What is a home warranty?
A home warranty plan is a service contract that protects a home’s internal appliances and systems.
Just like home insurance, homeowners need to pay a monthly or yearly premium for their home warranty plans. Usually, the premium amount ranges between $300 to $600 a year. Then, if any of the covered systems or appliances break down, instead of calling any repairing service, the homeowner should call their home warranty company. The home warranty company then sends out a repairing service contractor who specializes in the repairing of that particular system or appliance.
The homeowner pays a flat service fee called the deductible ( Generally, the amount ranges between $60 to $100, depending on the home warranty company) to the repairing contractor for the problem diagnosis. If the issue is covered by the home warranty plan, the home warranty company pays the costs of repairing or replacement.
What does a home warranty plan cover?
A home warranty plan covers the critical systems of a house, such as electrical, plumbing, heating, and cooling. It also covers major appliances like dishwashers, refrigerators, ovens, washers and dryers, etc.
A home warranty company has different plans to cover some specific or all items.
Home warranty companies don’t pay for the items that not have been maintained properly or damages caused by the structure of a house.
What is home insurance?
Having home insurance is a must for homeowners who have mortgages. It covers the structural damages to a house caused by theft, fire, hailstorm and any other natural disasters. It also covers the medical expenses for injuries of an individual sustained by being on your property.
The homeowners need to pay a yearly premium to the home insurance company. The premium amount lies between $300 to $1000 a year. When any of the covered items are damaged by a disaster, the homeowners call the home warranty company to file the claim. If the damage is covered under the policy, the company will issue a check to the homeowners. The homeowners have to pay a deductible out of their own pocket before getting the claim money from the home insurance company. The home insurance deductible amount can be anywhere from $100 to $ 2000. Usually, the higher the deductible, the lower the yearly premium costs.
What does home insurance cover?
Home insurance covers the structural damages of a house and a homeowner’s property due to fire, theft, hail, trees, storm, water overflow or other natural disasters. A homeowner’s insurance policy term them as “Perils” in their contract.
Home insurance doesn’t cover the items inside a home.
What do you need- a home warranty plan or home insurance?
When it comes to protecting your home in terms of both externally and internally, it is a wise plan to have both investments. If you have a mortgage, home insurance is a must but when it comes to protecting your home appliances and systems, you should purchase a home warranty plan to safeguard your savings.
