Difference between a Home Warranty and Home Insurance

Home warranty is not an insurance. Rather, it is a service contract that cover repair and replacement costs for home appliances. Most home insurance policies have some type of coverage for appliances, but it tends to only kick in if the house in general suffers damage. Because of this, may home owners have purchased home warranty along with home insurance. This document will compare the two and show how each one works.

Buying a Home Warranty vs Buying a Home Insurance

Depending on the locale, the home warranty is purchased by either a home seller or a home buyer. If it's a former, the warranty is included in the home's sale price, and the warranty kicks in as soon as the buyer assumes ownership. Compared to home insurance, home warranty is relatively inexpensive. In most areas, it will cost anywhere between $25-400 per year, depending on the level of coverage.  The warranty holder must pay a $100 service fee every time the warranty is used, but other than that, there are no additional expenses. Once the year ends, the home can either renew it or let it expire.

Home insurance must always be purchased separately from the house. Unlike home warranty, the home insurance is a loan, so the policy holder has to keep it until he or she replays it in full. The policyholder must pay a premium (a portion of the money he or she owes) and interest. The interest can be either fixed or variable. If it's the former, it remains the same. If it's the later, it goes up or down depending in the market conditions.

What They Cover

Home warranty covers the costs of repairing home appliances, but it does not cover everything. Generally peaking, the less the buyer pays for the home warranty, the more selective it will be able what types of appliances it will cover. For example, many lower-range home warranties won't cover refrigerators, dryers and/or garage door openers, while coverage of to pools and outdoor spars is almost always reserved for more expensive plans.

The home warranty will cover the cost of repairing and, if the damage is severe enough, replacing any appliance that falls under it's coverage. Some home warranties will cover the costs of bringing the appliances up-to-date with the new safety regulations. The home warranty company reserves a right to deny coverage if the appliance was damaged due to improper maintenance, building code violations and or improper installation. It can also deny coverage if the appliance shows unusual wear and tea. The warranty holder has a right to appeal the company's decision by contacting his or her real estate agent. The agent will then try to negotiate a compromise with the company

Home insurance will cover the costs or repairing the damage and (if necessary) replacing the appliances so long as the policy holder can prove that the damage was due to something that damaged the house as a whole. For example, the insurance company will cover the appliances if the house was damaged in a storm, but it will not cover a dishwasher with a shorted circuit. Some home insurance policies will only cover appliances that are essential to the policy holders' day-to-day lives.

Making a Claim

When the appliance breaks, the warranty holder must call the home warranty company and explain the situation. The company will then call a home appliance repair provider. The provider will hen call the home owner to schedule an appointment and send one of it's employees to fix the appliance. The warranty company will cover all the expenses involved in repairs - all the warranty holder has to do is pay a service fee.

Home insurance companies, on the other hand, only cover the costs of repairs - the provider must hire the contractor to make the repairs themselves. However, they may not cover the entire cost. Each insurance company has a limit on how much money it will pay per claim (and, in some cases, per certain period of time). The policy holder would have to cover the rest out of his or her own pocket.


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