If you are already the owner of a house or planning to invest in one, then one thing might be confusing for you. The difference between the home warranty and home insurance is tricky at times. After all, our main aim is to safeguard the investment or hard-earned money in an effective way. Still their lies a difference in the various forms of protection that these policies offer. If you actually know the difference between these covers, it will be much easier for you to decide. A home insurance policy is clearly not a home warranty. Whether you buy a home for the first time or moving into a second home, you must know about both of them. Let’s get into details about home warranty vs home insurance.
How Do You Define Home Warranty?
A home warranty is a contract the provides benefits in the form of service. It helps with the payment for repairing the product or even replacing it. So it is going to cover only home systems and household appliances. All you have to do is make payment of an annual fee or monthly payment; you won’t be charged more than the service calls’ linear rate. Suppose you own a machine or system that breaks down and is covered under the plan. The company with which you have a home warranty will make arrangements for the technician to diagnose the problem. All you have to do is make the payment for a service call. This doesn’t mean a home warranty doesn’t have a coverage limit. Once you sign the contract, the benefits are as high as $1500 per year for the eligible appliance. Also, the claim limit for you is not more than $15000 for a year.
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Suppose you apply for a home warranty. Now, you are buying a house that is part of real estate. So you won’t have to wait for a long to get the benefits of this coverage. You have to finalize your house, and the services will begin. Now, you already own a house and plan to invest in a home warranty for it. The condition won’t remain the same. You get the benefit of coverage after a minimum of 15 days that may stretch to a time of 30 days.
What About The Home Warranty Coverage?
You don’t need to buy a new flat or house to register for a home warranty. It applies to even old homes, and you realize that you need coverage for the appliances. In most cases, you will find these three types of plans:
- System Plans (Plumbing, HVAC, and systems that are electrical)
- Appliance Plans (Dishwasher, Washer, and Refrigerator)
- Combination Plans (Everything that comes under the plans that are already in the above plans)
There are a lot of companies that even allow customization in coverage. It means you can add coverage for particular products that are not part of the usual plans. You can add a few things: spas, pools, wells, and uncommon appliances like dishwashers.
How Much Do You Need To Pay For Home Warranty?
Home warranty costs depend on the following fees:
Monthly or Yearly fee: This fee is something you need to pay for access to discount service calls. It depends on the location you live in or the plan you are buying. You will have to pay between $350 and $1100 per year.
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Service fee: You have to pay this fee every time you face a problem and send a request to repair an application or system. In most companies, there is a service fee for several levels. It ranges from a minimum value of $55 to a maximum value of $150 per service call. Generally, the annual fee is higher if the service fee is low. This gives you an idea of the home warranty vs home insurance thing a bit.
Homeowners Insurance: Definition
Home insurance is a form of property insurance that protects against damages; covered perils cause it. According to the III, this insurance covers four types of coverage:
#1: Coverage For Home Structure
If there is damage or destruction of your house, then it comes under it. The payment for the repair and rebuilding of the house is under contract. Most of the policies provide coverage for structures other than homes that are still on the property. It includes tool sheds, garages, gazebos, and decks.
#2: Personal Belongings
This is going to cover your clothes, sports, furniture, and equipment. The coverage peril must include the mode of destruction, or it must be stolen. If you have an expensive item, then it will need an additional endorsement for personal property. You need to ensure adequate protection.
#3: Liability
Liability coverage is highly beneficial as it protects against lawsuits for physical damage and property damage. If the policyholders, their pets, and family members cause this damage, then the coverage helps.
#4: Additional expenses
This will pay for meals, hotels, and other living expenses if your house is not habitable enough. The reason again should come under peril.
How Much Coverage Does Homeowners Insurance Offer?
If we compare and find the most famous home insurance policy, then it is the HO-3. It is going to cover liability, home, and belongings. Here, go through the list of few disasters against which coverage comes under homeowners insurance.
- Theft
- Explosion
- Fire breakout or lightning
- Civil commotion
- Cause of damage: Vehicle or aircraft
- Smoke
- Windstorm
- Volcanic eruption
- Falling object
Homeowners insurance provides coverage against your personal liability. If someone like your friend or relative suffers from injuries, you get benefits for that too. It means the people who don’t stay with you. Also, it includes their property like an appliance while it is on your property. People mostly claim for liabilities like home accidents or pet bites.
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It is important to note that policies like home insurance don’t cover the damages or losses that floods cause. Depending on your living place, you must buy an additional policy for earthquake or flood, or any such damage.
How Much Do We Need To Pay For Home Insurance?
The average amount that you pay for a home insurance premium is $1.211 for the homeowners’ homes. We have come to this conclusion after going through the NAIC report 2019. You must pay less or more, depending on a few factors:
- Your residential address
- Rebuilding cost of your home
- Cost of your personal things
- Your home’s size, condition, and features
- History of your insurance claims
- Your credit score and marital status
Final Verdict
If an appliance or system doesn’t work or there is a sudden breakdown, then a home warranty helps. Home insurance is different from the warranty. It protects your personal belongings and home against any sort of stealing and other perils. You get personal liability coverage too. If you are dealing with a mortgage, then the lender will need a home insurance policy. It helps in protecting your investment with the help of an insurance policy. Here, it gives a clear definition of the home warranty vs home insurance thing.
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