If you own a home, you probably have home insurance. In fact, it’s likely that you’re required to have it. But do you have a home warranty? You may be asking yourself what is a home warranty and do you even need one? The answer is yes!
A home warranty, like home insurance, is a crucial piece of protection for any homeowner. And it’s when you are covered by a home warranty and insurance that you have the most security and best coverage any homeowner can hope for. Below we’ll go into greater detail about each type of policy and why, most importantly, it’s crucial to have both.
Theft, storms, fires, natural disasters – will any of these things definitely happen while you own a house?
For many people, probably not. But they might happen and that’s when you’ll be glad you have homeowner’s insurance. Of course, most people are actually required to have homeowner’s insurance. You’ll generally be required to have one before a bank will give you a mortgage on a home.
A home insurance policy covers four primary areas: the interior and exterior of a house, personal property in the case of theft, loss or damage, and general liability if someone is injured on your property. Policies are renewed yearly and have an average annual cost between $300 and $1000. Policies offer a deductible (the amount you're responsible for on a claim) and only after it’s been met do they take care of the additional costs.
A home warranty is a service contract that covers repair or replacement of home systems and appliances that fail due to both age and standard wear and tear. HVAC, electrical, kitchen appliances, plumbing and washer/dryer may all be covered under a home warranty. For example, an AHS® home warranty covers up to 21 of your home’s major systems and appliances. Unlike home insurance, home warranties are not mandatory and are typically purchased as 12 month contract terms. They usually don’t require a deductible and you’re instead charged a moderate service fee.
In practice, a home warranty works like this: If your refrigerator stops working, a licensed and qualified service technician is dispatched to come out and evaluate the problem. Assuming the problem is because of wear and tear, age or another circumstance covered under the terms of your service contract, the technician will either make the repair or replace the appliance for only the cost of your service call. Each visit from a service technician typically costs between $75 to $125. Given the cost of a repair or potential replacement of the affected appliance or system, this can result in savings of hundreds or even thousands of dollars.
Next > What's the Difference: Homeowners Insurance vs. Home Warranty
The best way to think about homeowner’s insurance and home warranties is as two different policies working together to give you maximum protection. Say you have a leaky pipe, depending on the nature of the leak it may be covered by one policy but not the other. The home warranty would cover the repair of the pipe but not the damage caused by the leak. On the other hand, homeowner’s insurance would cover the damage of a major leak but not necessarily the repair of the pipe.
With both policies you’re covered on both the repair and the damage caused by the leak. When it comes to home protection warranties and insurance are really two sides of the same coin. Home insurance protects you from the things that might happen. And with a home warranty plan, you no longer have to worry about the things that will happen. That’s coverage everyone can feel comfortable with.
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