Home Warranty vs. Homeowners Insurance: What’s the Difference?

Home Warranty vs. Homeowners Insurance- Whats the Difference- 150x150Buying a home is a big part of the American dream, and many people make becoming a home owner one of their primary goals in life. Being a home owner comes with a few responsibilities, one of which is making sure that your home is protected from damage that might occur over time. Home warranties and homeowners insurance may sound like they are very similar, but there are actually several significant differences between the two. For example, home warranties generally cover appliances, plumbing, electrical, and heating and air conditioning systems. Homeowners insurance, on the other hand, covers damage that occurs mostly to structural parts of your house, such as the foundation or the swimming pool.

Both home warranties and homeowners insurance are designed to protect your home, but in different ways. Deciding between the two or choosing both to cover your home is up to each home owner’s individual preference.

Home Warranty

After becoming a home owner, the last thing that you want to happen is to spend more money because something is broken or is malfunctioning in your new home- that’s where home warranties come in. Especially if you’re a first time home buyer and have no experience maintaining and repairing a home, buying a home warranty will not only give you peace of mind, but possibly save you a large amount of money if something expensive in your home breaks.

When buying a home, the home warranty could already be paid by the seller. Some home sellers in a buyers’ market choose to pay for the home warranty themselves in order to give more confidence to the buyer and to avoid being called by the buyer after closing because something in the house is broken or is malfunctioning. This differs from one seller to another, but you may also receive the home warranty from the real estate agency, as a gift, which is always a nice surprise.

Depending on the chosen plan, home warranties can cover various systems, such as plumbing, electrical, and heating  as well as appliances, such as stoves, ovens, and refrigerators. Home warranty companies have a group of contractors that they use when something in your home breaks. If the appliance or system cannot be repaired, the contractor will replace it and charge the home warranty company.

When buying a home warranty, home owners must carefully read all of the documentation and find out what is covered by the warranty and what isn’t. Some policies may cover certain appliances, while others may charge extra for the coverage or don’t cover them at all.

Homeowners Insurance

Homeowners insurance mainly protects your home from damage caused by rain, floods, fire, and wind, as well as vandalism and theft. Homeowners insurance may also help you deal with the financial consequences of injuries occurring at the property, particularly when the injury has occurred due to something being defective on the property.

Homeowners insurance is generally required when you purchase a home with a mortgage loan. Lenders use homeowners insurance to protect themselves should a hurricane, fire, or other hazard occur and cause substantial damage to the property.

Not all homeowners insurance policies are created the same, so they may cover your home for only certain things, while charging you more for extra protection. Some policies, for example, do not cover damage done by what is considered an “act of God”, like earthquakes or floods.

It is up to each home buyer to choose between a home warranty and home owners insurance, unless they want to have both  or are required by the mortgage lender to have the home insured. Having you and your home covered by both a home warranty and insurance will not be cheap, especially if you want to cover everything, but it will give you peace of mind and, should something happen to your home, maybe save you some money. Nature can be cruel and cause substantial damage to your home, so it’s always better to be safe than sorry. Being a home owner is expensive enough without having to worry about unforeseen events messing up your financial situation.


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