Understanding the difference between your home warranty and home insurance can save you from financial headaches when things go wrong at home. Let’s break down these two types of coverage to help you make informed decisions about protecting your property.
The Difference At-A-Glance
- Home warranties cover repairs and replacements for certain systems and appliances in your home.
- Home insurance covers property damage to your home, other structures, or belongings in the case of unexpected events like fires, hail, wind, vandalism, or theft.
Both come with limits on what they cover. Read on to find out more.
What You Need to Know About Home Warranties
The name, home warranty, can lead you to believe that this protection covers your home. That’s not exactly the case. Home warranties cover the major appliances and systems in your house.
- When you might purchase a home warranty
Home warranties are generally offered when you purchase a new appliance or system. Examples include washers, dryers, refrigerators, ovens, dishwashers, and garage door openers. You also may have a home warranty for electrical, plumbing, heating, and cooling systems. In case one of these “big ticket” purchases malfunctions, you can avoid a major out-of-pocket expense. The home warranty kicks in after the manufacturer’s warranty expires.
You can also buy a home warranty at any time directly from a home warranty company. Sometimes home warranties are offered as part of real estate transactions as an incentive to close the deal. Such warranties offer peace of mind for the future homeowner.
- What your home warranty covers
Home warranties usually cover service, repair, and replacement of a product for a covered problem and everyday wear and tear.
- What your home warranty doesn’t cover
Your policy might deny coverage if you have not been keeping up with maintenance. They also could deny coverage for improper installation or modifications, pest damage, or pre-existing conditions. Check your warranty policy for the details of what may be excluded from coverage.
- How coverage works
You file a claim. The warranty company connects you with an approved contractor to perform the repair. A technician visits your home to diagnose the appliance or the system, and to recommend a repair or replacement. There may be a service fee associated with this visit. If the repair is simple, the technician can do it the same day. If a replacement is needed or a part must be ordered, then a follow-up appointment is scheduled.
- When seeking a home warranty, be an informed consumer:
- Take an inventory of your large home appliances and systems. Write down their age and condition. Record the last time they were serviced.
- Estimate how much it will cost you to replace those systems. If you can afford to replace them without help, you do not need a home warranty.
- Consider a home inspection. This will document any pre-existing conditions that will not be covered by a warranty.
- Research coverages and payment amounts. Read the fine print. Many companies limit the amount that they will pay, and it may only be a portion of the appliance or system.
- Check that the company you choose is in good standing with the Better Business Bureau.
What You Need to Know About Home Insurance
A homeowner’s policy is a “package” of coverages. It protects your home and personal property from specific events that can damage them and provides additional living expenses if you are unable to live there due to an insured loss. In addition, your homeowner’s policy covers you for lawsuits or liability claims that might otherwise be your responsibility if you accidentally injure other people or damage their property.
- When you might purchase home insurance:
You will purchase home insurance when you buy your home. If you have a home mortgage, then maintaining homeowner’s insurance is generally a requirement of your loan agreement. Even if you own your home outright, it’s recommended that you protect your equity in the home by maintaining homeowner’s insurance.
- What your home insurance covers and doesn’t cover:
Following are highlights of what your home insurance policy covers and doesn’t cover. For details on these and other coverages, see our blog on Home Insurance 101.
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- Dwelling coverage refers to the structure of your home: the roof, walls, floorboards, cabinets, and bath fixtures. A loss is covered unless it’s excluded by your policy.
- Other structures insurance covers pools, fences, gazebos, sheds, etc. A loss is covered unless it’s excluded by your policy.
- Personal property coverage protects your possessions, such as furniture, clothes, sports equipment, and other personal items. If your possessions are stolen, or damaged by fire/smoke or any of 16 covered “perils,” your policy will pay for them subject to your deductible.
- If your home is damaged in a covered loss, it may not be livable. If that’s the case, you would need to stay somewhere else. Loss of Use, also called Additional Living Expense, covers you for any necessary increase in living expenses, such as lodging, food, and gas.
- Personal Liability protects you if a claim is made or a suit brought against you for bodily injury or property damage caused by an occurrence to which coverage applies. Liability covers you at your place or anywhere in the world.
- If you are not liable, but your guest was injured through his/her own fault, then Coverage F – Medical Payment to Others may cover your guest’s medical bills.
- How coverage works:
You file a claim. You’ll fill out the necessary paperwork online or by email. For a homeowner’s or personal property claim, you will need to provide a Proof of Loss statement. That’s a list of items that were damaged or stolen and how much it costs to replace them. You may have to get a repair estimate and include that information. Then, you’ll wait for approval. Once the repair is authorized, you’ll be able proceed. Either you or the contractor will receive payment from the insurance company, so check with your adjuster. You will be responsible for the deductible amount, the amount that you will pay out-of-pocket before insurance kicks in.
- When seeking home insurance, be an informed consumer:
Estimate how much it would cost to rebuild your home from scratch in your current location. Also ballpark the cost to replace all your personal property. This will give you a starting point as to how much insurance you will need.
Determine if you will need specialized coverage beyond a standard homeowner’s policy. For example, you may want flood or earthquake coverage for your location.
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- Shop around for insurance, and keep in mind, that it usually pays to buy home and auto coverage from the same company. When you bundle your home and auto insurance, you can often qualify for reduced rates, saving hundreds of dollars.
- Ask about discounts. You may qualify for insurance discounts for being part of a professional association, such as groups for teachers, nurses or first responders. There are also discounts for being retired, for paying via automatic bank payments, and for paying in full upfront.
- Check that the insurance company you choose is in good standing with the Better Business Bureau.
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This article is furnished by California Casualty, providing auto and home insurance to educators, law enforcement officers, firefighters, and nurses. Get a quote at 1.866.704.8614 or www.calcas.com.
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