Owning a house can be overwhelming. With all the potential hazards, it can be a risky venture. Anything can happen at any time – burglars, hail storms, furnace breaking down, and just anything else! Thankfully, there are options available when you need that financial safety. The two main options available with Homeowner Insurance Companies are – homeowners’ insurance and home warranties.
However, it is very important to understand the differences between the two and choose the most suited policies.
Homeowners’ insurance –
A homeowners’ insurance policy in Texas covers the damages caused by a listed set of perils. Damages done to the house by natural disasters, vandalism, natural calamities, accidents, other threats, etc. are all covered in the homeowners’ insurance. The exterior and the interior of the house, are covered under this policy. Additionally, this policy also protects you from liability in case if someone else has injured your property. For those who have taken a mortgage to finance their house, their lender may need the homeowners' insurance quote to protect their interests and yours.
Home Warranty –
In this policy, the essential appliances and the systems within the home are covered. If the appliance or the system has been damaged, with a home warranty, you can get the repair or replacement done if the piece breaks down. A home warranty covers the contracts like electrical, plumbing, HVAC system, refrigerator, oven, dishwasher, stove, washer, dryer, garbage disposal unit, etc. You have the option of purchasing additional coverage for extra charges that protect the hot tub or the swimming pool (if you have it).
The contracts usually last for a year and are renewable. The annual coverage fee is around $400. Plans that are inexpensive offer basic protection and the ones that are expensive offer more coverage. A home warranty plan does not necessarily require a deductible, unlike the homeowners’ insurance policy. The home warranty coverage is optional and will not be required by your mortgage lender or anybody else.
Home Warranty vs. Homeowners Insurance Policy – the difference between the two
A home warranty is not the replacement for homeowners insurance. While a home warranty plan can cover the service, repair, or replacement of the home appliances like plumbing, HVAC, or electrical, a home warranty clearly lists down what all will be included in the contract and some contracts can be robust than others.
On the other hand, homeowners’ insurance can convert the damages and the losses that happen due to known perils that include vandalism, hail, theft, fire, and other natural calamities, and so on. Some of the ‘more comprehensive’ plans, also known as all-risk plans extend beyond the basic perils with fewer exclusions.
With basic homeowners’ policy, if a can of paint is spilled on the floor and damage is caused to it, the peril may not be covered. But, with an all-risk policy, this damage is covered too. However, whether or not these minor accidents like paint spills or damage caused due to water entirely depends on the coverage and exclusion in the policy. Whether you choose an all-risk policy or named perils policy, if you own a house, it is wise to invest in homeowners insurance. Your mortgage or home equity lender will need your homeowners' insurance, which again is a huge difference between homeowners insurance and a home warranty.
A home warranty can complement the homeowners' insurance as it covers the damages that some home insurance policies do not. Home warranties are designed as the contracts of inclusion. On the other hand, homeowners insurance is designed as a contract of exclusions. The factors covered by the home warranty are the items, parts, and solutions that they mention in the contract. A homeowners’ insurance has a broader coverage with certain exclusions.
A home warranty plan does fill out some exclusion gaps in the homeowners' insurance policy and provides an additional layer of coverage for reducing the financial risks that are associated with homeownership. So, when it comes to choosing between the two, it is never an either/or decision. Typically, the insurance policy will not help in reducing the costs of plumbing or electrical repairs but is rather a part of the overall protection program for the house.
A home warranty is not usually so crucial as compared to homeowners insurance. Anybody who owns a house can consider getting a home warranty as it serves as an extra layer of protection for the house. It can help in alleviating the supposed financial burden of the unexpected wear and tear of any appliance or its repairs or replacements.
Homeowners Insurance Policy or Home Warranty – which one to choose?
A good home warranty policy can act as a cover shield that protects you from the financial burdens of expensive repairs. But, warranty offers can exclude certain coverage for questionable reasons. Thus, it makes it difficult to review the amount you pay to the policy. You also face the risk of getting low-quality repairs done from a provider that is not of your choice.
In order to determine whether or not a home warranty plan is good or not for the situation you must check whether all the appliances that you own in your house have a manufacturer’s warranty or not. You also need to figure out the cost it may take to repair them or replace them. Based on this comparison, you can determine the amount you likely will be paying to the Homeowner insurance companies.
Warranty coverage works well for those who do not have surplus cash reserves. But, it may not work out for those who have enough savings. It may also not work out for those who plan on buying a new construction home wherein the builder or real estate agents may provide you a warranty for free. If you maintain your current appliances well, you may avoid buying a home warranty plan.
Do your Due Diligence –
Homeowners Insurance Policy and home warranty, each have its own set of pros and cons. In order to figure out what works or does not work for you, you must do your research and decide based on your current situation. Also, it is wise to talk to the Homeowner Insurance Companies as the experts there will be able to guide you on the best-suited option for you.
