Home Warranty vs. Home Insurance

Home Warranty vs. Home Insurance

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.

    • 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.

      • 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.

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.

Earthquake and Flood Safety

Today, an 8.9-magnitude quake struck Japan, causing widespread devastation and setting off a chain of tsunamis that are affecting coastlines as far away as California. Our thoughts and prayers go out to those whose lives have been turned upside-down by this historic disaster.

When things like this occur – it’s important that we remind ourselves of steps to take in the face of disaster.

Earthquake safety is all about preparedness. We found a list of 7 Steps to Earthquake Safety, and wanted to share them with you here:

– Identify hazards such as heavy items that aren’t secured, and repair them
– Create a disaster plan
– Prepare disaster kits that contain first aid items and fresh water
– Identify building weaknesses and repair them
– Drop, Cover, and Hold on
– After an earthquake, check for injuries and damage
– Follow your disaster plan

We encourage you to read the full description of the steps here.

We also recently posted a guide to flood safety, which can be important in the aftermath of a tsunami. Follow the link to read.

Protect Yourself During Flood Season

With winter winding down (finally!) – our thoughts are turning to spring and summer, and some of the damaging rain and storms that come with the changing seasons. Certain areas of the US are already seeing flooding from some of these storms, so we wanted to share some tips from the FEMA website for staying safe during a flood.

How to react if a flood is occurring near your home:

  • Listen to the radio or TV for information
  • Be aware of flash flooding, if there is a possibility of a flash flood, move immediately to higher ground
  • Be aware of streams, drainage channels, canyons, and other areas prone to flash flooding.

If you must evacuate, attempt the following:

  • Secure your home as much as possible. Bring outdoor items indoors, and move essential items to a higher floor
  • Turn off utilities and the main shutoff points. Disconnect as many electrical appliances as possible. Do NOT touch electrical equipment if you’re in standing water.
  • Do not walk through moving water. It only takes 6 inches of moving water to make you fall.
  • Use a stick or cane to check ground firmness where you are walking
  • Do not drive in flooded areas. Flood waters can sweep you and your vehicle away quickly

Driving in Flooded Areas

  • If you find yourself driving in flood conditions, be aware that only 6 inches of water will reach the bottom of most passenger cars and can cause stalling
  • A foot of water will float many vehicles
  • Two feet of rushing water is enough to float away even heavy SUV’s and Trucks

We hope you never need to use these tips, but it pays to be aware of the dangers of flooding before they happen!

If you happen to have your own website or blog, you can add some cool widgets provided by FEMA by going to their site here and downloading them.

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