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The Difference Between Homeowners Insurance and a Home Warranty

By: Mike Thomas

There are a plethora of intricacies related to buying a home that can become overwhelming. Understanding the difference between homeowners insurance and a home warranty can be one of them, but it doesn't have to be confusing. The differences between the two are rather striking, which is why this blog post is here for you to understand these differences and make an informed decision about which policy is best for you.

The basic similarity between that of a homeowner's insurance policy and a home warranty is that they are both designed to give the buyer financial protection for their home when something disastrous happens. Outside of this similarity, everything else is quite different. Homeowner's insurance contains a lot of variables, especially compared to a home warranty. Everything from types of coverage to costs, differ greatly with a home warranty. Homeowners insurance tends to focus on the legal side of things, while a warranty is simply coverage in an event that your appliances break or simply don't work properly. A home warranty will cover everything that centers around repairs to your home, whether they be plumbing or electrical, or to your appliances. These come in handy to protect against the typical problems that will arise with any homeowner.

As for homeowners insurance, there are a few complexities that far remove it from a home warranty. For instance, homeowners insurance is required by the state government when you purchase the house using a mortgage loan, while a home warranty is merely recommended. In this age of technology, many experts suggest that you buy a warranty on top of the homeowners insurance that is required. Homeowners insurance doesn't protect appliances in the same way. The insurance is designed to safeguard against environmental damage, such as strong winds, hail, and fire, as well as the theft of your belongings. Home insurance also offers liability coverage, which will cover you financially if someone were to file a lawsuit against you up to the amount stipulated in the coverage. If you're home were to be damaged and needed to be renovated, in which case you would have to relocate to another location for a short duration, then homeowners insurance will cover the costs.

The way coverages work between these two forms of protection is somewhat different as well. In the case of a home warranty, the process of filing a claim is very straightforward and simple. You, as the homeowner, pay a certain sum each year for this coverage. If an appliance or machine that is covered under your warranty breaks or needs minor repairs, then you file a claim, after which a technician is sent to your home to take a look at the damage. Once this happens, they can either deem that a few repairs will need to be done, or, if the damage is too severe, they will take it and replace it with another appliance of the same type. While the claims process can take some time, it is designed to ease your mind as much as possible, and works the majority of the time.

As for homeowners insurance, you are assessed a monthly premium for the insurance. If anything under your coverage is damaged, accidentally or by theft, then a claim must be made, after which your insurance will cover all costs, and replace stolen items. This insurance does not, however, protect your major appliances, as a home warranty does. One of the last differences are the costs. Home warranties generally cost a bit lower, usually around $250 to $500, while homeowners insurance can cost anywhere from $350 to $1,000.


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†Average repair and replacement costs as reported in a nationwide survey: A Study of Homeowners Appliance and Home System Service Experiences Decision Analyst (2011) and reprinted with their written permission.

Home protection plans are subject to exclusions and limitations including repairs or replacements of covered home system components and appliances. See contract for details.