A home warranty can cover service, repairs or replacement of your home’s major appliances and mechanical systems. Home insurance covers your house itself and your belongings in the event of sudden and accidental damage. It can help pay for damage caused by fires, leaks and other common perils named in your policy.
Any home you buy, old or new, will need repairs at some point. For this reason, you can buy home warranties and home insurance. But they can help in very different ways.
A home warranty is like the extended warranties available when you buy something new. It’s a service contract where you agree to pay a certain amount per year, and if your product develops a covered problem, your warranty company will cover repairs, or may provide you a replacement, at a reduced — or no — cost to you. A home warranty typically covers your home’s major appliances like the refrigerator and washing machine. It may also cover your heating and cooling, electrical and plumbing systems. A warranty is there for things that break down or stop working — situations that home insurance is not designed to cover.
Home insurance covers your home itself — the walls, floors, windows, roof, garage — and your belongings if a storm, fire or other calamity causes damage, or if something is stolen. If a toilet leaks while you’re away and ruins the floors and furniture, your home insurance can help with the cost of fixing or replacing them. A home warranty typically wouldn’t help in this scenario.
Your home insurance can also do a lot more. Say a tree in your yard falls on a neighbor’s house and wrecks the roof. Or a guest slips on your icy steps and breaks a leg. In both cases, the liability part of your home insurance can help pay the costs — for repairs to the roof or for medical treatment. It can also help you pay for legal costs if you’re sued for damage or injuries you’re found responsible for. A home warranty does not cover costs for injuries or damage to someone else or their property.
Both kinds of protection come with limits, often defined by choices you make about coverage. A home warranty, for example, might not cover an appliance that breaks down but is still under factory warranty. Your warranty company may also have requirements about which repair companies you can use. And it might not cover the cost of a major appliance upgrade if you’re replacing an old one that fails.
Meanwhile, your home insurance policy will kick in only for damage caused by certain events — wind, hail and other “named perils,” in insurance lingo — covered by your policy. Not every kind of catastrophe is covered. For example, flooding generally requires special flood insurance.
Both kinds of protection come with built-in limits on the number of repairs or costs covered. The limits are based, in part, on how much you want to pay for the coverage.
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