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Understanding Home Warranties and Home Insurance

Is a Home Warranty the Same as Homeowners Insurance?

Home warranties and homeowners insurance are two different types of coverage that can complement each other to help protect your home. A home warranty pays to fix or replace your home’s systems and major appliances if they stop working during normal use. Home insurance, on the other hand, pays to repair or rebuild your home if it’s damaged or destroyed by an event covered in the policy.

What Home Warranties Cover

Home warranties usually cover the following:

• Plumbing
• Electrical
• HVAC
• Water heater
• Ducts
• Garbage disposal
• Dishwasher
• Stove and oven

You may also be able to purchase additional coverage for items like refrigerators, washing machines, dryers, spas, and swimming pool pumps.

What Home Warranties Don’t Cover

Home warranties generally do not cover:

• The physical structure of your home
• Appliances or systems not listed in the warranty
• Damage caused by poor maintenance
• Damage due to insects or vermin
• Failure due to incorrect installation
• Appliances or systems that have been modified
• Anything you attempted to fix yourself and failed
• Failure due to problems that started before your warranty became active

Who Should Buy a Home Warranty?

Consider buying a home warranty if:

• Your home’s major systems or appliances are no longer under a manufacturer’s, builder’s, or credit card’s warranty
• You couldn’t easily afford to replace or repair a major appliance or home system
• You don’t want the hassle of finding a repair company, comparing quotes, or managing repairs

What Home Insurance Covers

A standard home insurance policy provides four kinds of coverage:

• Dwelling or structure coverage
• Personal possessions coverage
• Liability insurance
• Additional living expenses insurance

What Home Insurance Doesn’t Cover

Homeowners insurance doesn’t cover the following risks:

• Earthquakes
• Floods
• Sinkholes
• Sewer, septic tank, or drain backups
• Normal wear and tear to your home and its systems

Who Should Buy Home Insurance?

You should purchase home insurance if:

• Your home is mortgaged
• You’d have trouble paying out of pocket to rebuild your home if it were destroyed by a major emergency
• You’d struggle to pay for a major home repair
• You want to protect your assets against lawsuits by visitors to your home or property

Do I Need a Home Warranty and Home Insurance?

Home insurance is generally essential, while home warranties are not. Although homeowners insurance isn’t required by law, it’s usually required by mortgage lenders. Home warranties can fill gaps in your home insurance policy by covering wear and tear to a home’s appliances and systems. However, many home warranties have significant exclusions, so make sure you know exactly what a home warranty covers before purchasing one.

The Bottom Line

Home insurance and home warranty plans are two different options for protecting your home. Whether to buy both depends on your needs and budget. Setting aside money for home maintenance and repairs could give you more flexibility than paying for a home warranty. Building a solid emergency fund can give you the resources to repair or replace appliances or systems when they break down.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage needs!

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