Understanding Home Insurance vs a Home Warranty

When purchasing a new home, it’s important to do in-depth research on all facets of the homebuying process. One thing you’ll need to understand is how to best protect yourself and your investment if anything were to go wrong. Enter: insurance and home warranties. Both offer protection on different aspects of homeownership. Here’s a quick snapshot:

Home Insurance - Homeowners insurance pays for any accidental damages and loss that are caused by fire, lightning strikes, windstorms, and hail, however, damage from earthquakes and floods is typically not covered. It also covers the replacement of personal property in case of theft or damage and liability if a person were to get injured in your home or on your property. When buying a home, the bank will require you to obtain a policy before the mortgage is issued. Details and options range greatly, but, in general, each type of coverage in the policy is subject to a limit and, in most cases, you will have to pay a deductible.

Home Warranty - A home warranty is designed to cover the cost of repairs and replacements of larger appliances and crucial systems in your home that may fail or break due to age and wear and tear. This includes but isn’t limited to HVAC, electrical, or plumbing components, kitchen appliances, and your washer and dryer. With a home warranty, you are required to pay a premium (just like homeowners insurance) even if you do not use it. And home warranties won’t cover damages if appliances were not maintained properly or if the damage is from a fire or other disaster.

Again, these are just the basics, and there are many things to consider when determine which type of insurance to take out on your home (for example -- do you also want earthquake insurance, does your bank require a flood insurance policy due to the location of your home, do you want an umbrella policy? etc.) But, my goal is to provide a jumping off point when thinking about where you want to go.