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Warranty vs. Insurance

What Is Home Insurance?

home insurance illustrationHome Insurance is required by the lender if you have a loan on your home. Home insurance varies on what is covered determined by the policy type. Covered perils might include hail or wind, vandalism, theft, fire, natural perils etc. Be an informed consumer on water damage coverage as it varies vastly. Home insurance insures the entire home, but does not cover natural wear and tear or maintenance.

Insurance & Escrow

Most people escrow their insurance, which means it’s included in their mortgage payment and held in an account until it is due. The invoice is sent to the lender and the lender pays the invoice out of the escrow, or Holding, account. Homes that are paid off do not require home insurance. However, it is imperative that home insurance is kept until you could financially afford to replace your home if it were destroyed.

Insurance Deductibles

Typically, there are deductibles associated with insurance claims. This also varies, dependent on types of policies and affects your overall premium cost. Common deductibles range from a set amount to a small percentage of the amount your home is insured. Home insurance policies might also offer some liability coverage. Personal property insurance may be added when you purchase homeowners insurance to cover your personal items such as the belongings that are most often kept in your home. A homeowners insurance policy is the best way to protect from loss.

home warranty illustration

What is a Home Warranty?

A home warranty policy has a different type of protection. It covers the components of your home including items like hot water heaters, heating and air, electrical, plumbing and some appliances. Much like a homeowner insurance policy, home warranty policies also vary. Additional options sometimes include water wells and septic systems.

How a Home Warranty is Paid

Home warranty companies are often very flexible on how a home warranty is paid. It might be billed monthly, quarterly, or yearly. There is a section in a Texas Real Estate Contract that allows a buyer, when purchasing a home, the opportunity to ask the seller to contribute a dollar amount “not to exceed a certain amount” toward the purchase of a home warranty, or “residential service contract”.

What to do When Something in Your Home Stops Working

When a homeowner with a home warranty experiences something that stops working, they should call the home warranty company directly. The home warranty company contracts with service providers to come out and repair or replace the item if it is covered by the home warranty. Typically, the homeowner simply pays a flat amount, similar to a doctor’s office co-pay to the home warranty company. The home warranty company could pay for the remainder of the covered cost of repair dependent on policy coverage and compliance by the homeowner with policy guidelines.

The Difference Between a Home Warranty & Home Insurance

Home insurance and home warranties pay for separate things. For instance, you might have a water line break that happens to be covered by a home warranty, but the home warranty will most likely not cover the damage the broken line caused. Your home is one of the best investments of a lifetime. Protecting your greatest asset is not only wise, but imperative. Do your research on the details of both your home insurance and home warranty policies to ensure the best protection of your home.

If you are interested in acquiring a home warranty, get in touch with one of our highly trusted home warranty providers.