Whether you’re a current homeowner or prospective first-time buyer, you’re likely familiar with home insurance. You may have also heard the term home warranty. Many homeowners, new and current, confuse the two and think they are the same. In reality, a homeowners insurance policy and a home warranty are very different.
Insurance is required, and you often can’t even get approved for a mortgage until you have insurance. A home warranty is optional, but highly recommended. The good news is that you can purchase a home warranty at any time, regardless of how long you have lived in your home.
Read on for more information on a home warranty vs. home insurance.
What is a Home Warranty?
A home warranty provides coverage for your home’s systems, such as the electrical system, heating and cooling, plumbing and appliances like your washer and dryer.
When your appliance or system breaks down due to wear and tear (not neglect), you would call the home warranty company who would schedule an appointment with the contractor. You would only pay for the service fee, and the rest would be covered under your home warranty contract. The good news is that the service is covered for 30 days, so if there are any problems with the repair, your warranty will cover it.
On average, a warranty costs between $300 and $600 per year, but having protection in case a major household appliance breaks down is priceless.
What is Home Insurance?
Insurance protects the structure of your home from damages due to natural disasters, falling trees and other related incidents. Home insurance also covers belongings that are damaged as a result of these disasters, or if they are stolen.
If your leaky toilet caused a flood in your house, your belongings would be protected by home insurance. Your insurance would also cover any damages to the interior or exterior of your home. Your home insurance would not cover the replacement of that toilet.
Read over your policies and contracts, and make sure you fully understand what each covers. In order to minimize out-of-pocket spending, you should have homeowner’s insurance and a home warranty. Having both will give you peace of mind if the unexpected happens.
Read the full post in Redfin Blog
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