Homeowner’s Insurance and A Home Warranty, Those are the Same Thing Right?
A misconception among homeowner’s or would-be homeowners is that a warranty protects the way insurance does or you can have just one or the other, but don’t need both. Not so, says Al Trestrail from RWS Warranty. I asked Al to enlighten the My 4 Walls readers about the difference. In short, he says they are similar but VERY different. Here is Al’s take on the subject.
- Home insurance covers damage to the house itself, for example by theft, fire, weather and some natural disasters. (Depending on your location, you may have to purchase additional riders for floods or earthquakes.)
- Home insurance plans are closely regulated by your state insurance commissioner while home warranties are more loosely regulated and variable.
- If your home is damaged, your home insurance plan will pay for the repair or replacement of the contents, such as your appliances, your clothing, and any art or jewelry you have insured.
- Typically, home insurance always covers personal liability: for example, if your dog bites a child, your homeowner’s policy would cover costs not covered by the child’s medical insurance.
Home warranties do not cover these losses. Instead, think of home warranties as appliances insurance that is far cheaper than purchasing an extended appliance warranty for each appliance.
- Home warranties cover the major systems and appliances in your house against wear and tear and breakdown. Although the details vary according to the plan’s terms, your appliances insurance will typically cover appliances and systems you use every day, including:
- Heating, ventilation and AC systems
- Water heater
- Plumbing and electrical systems
- Major kitchen appliances such as dishwasher, refrigerator, oven, built-in microwave, garbage disposal or trash compactor. (Home warranties typically exclude small consumer appliances like coffeemakers and toasters.)
Home insurance requires underwriting. Underwriting means that the cost of your policy depends on details about your home, its age, location, and construction, as well as its contents. In fact, some homes are uninsurable for a variety of reasons. Home warranties don’t require underwriting: everyone in the same area with the same standard warranty pays the same price.
And another important distinction, as long as you pay the premiums, your home insurance policy renews automatically. Home warranties are written for a specific period of time, after which you must renew them or they lapse.