Owning your own home is one of the greatest investments you’ll ever make. Once you buy your house, protecting this asset isn’t just smart—it’s integral.
The absolute best way to do this is to purchase a homeowner’s insurance policy as well as a home warranty. Buying both will cover your home, belongings, appliances as well as system components in case they need any replacement or repair.
The quick answer as to the difference between a home warranty and homeowners insurance is quite simple. Usually, homeowners insurance protects your home from fires, natural disasters, theft, or things that might happen, while a home warranty helps protect your budget when covered components break down due to everyday wear and tear.
What Is a Home Insurance Policy?
A home insurance policy covers any accidental damage to your home and belongings because of theft, storms, fires, or any other natural disasters. There are four main areas covered under the policy: the interior and exterior of your house, personal property in the event of theft, loss, or damage, and general liability that can arise when a person is injured while present on your property.
It is usually mandatory, and a bank will generally need you to obtain one before issuing a mortgage on your home. Usually, the annual cost of the policy is between $300 and $1000, and it is renewed every year. Every home insurance policy offers a deductible, which is what you’ll be paying when a claim is made and the policy will then take care of any additional costs.
What Is a Home Warranty?
This is a service contract providing for repair or replacement of your system components and appliances that may fail due to age and standard wear and tear. For example, components of your electrical, and plumbing, HVAC, kitchen appliances, and washer/dryer are all typically covered under this home warranty. You can also choose to cover larger systems such as your pool and spa. Home warranties typically have a 12-month contract term and aren’t mandatory to get a mortgage. While a home warranty is purely elective, it’s a smart purchase. Home warranty plans can be bought for around just $75 per month, with add-on coverage for things like an additional refrigerator or spool system being available for extra costs.