Most homeowners know the value of having extensive insurance coverage for their home, but an often overlooked necessity for homeownership is a home warranty. Many people mistakenly think that home warranties are not needed because insurance and other types of warranties will provide for emergency situations.
However, insurance coverage is not everything. If you are considering foregoing a home warranty to rely solely on your insurance and other warranties, there are some things you need to know about the differences between these two types of coverage.
One of the first differences between home warranties and insurance is how you pay for them. You pay into your insurance each month. If you make a claim, you pay your deductible and you also foot the cost of higher premiums in the future. Your premiums are decided in part by your risk and lifestyle.
Typically, a home warranty is a one-time cost that offers very specific coverage. The coverage lasts for set period of months or years. When the coverage period is up, you can make the decision to renew the coverage if you want to.
Unlike home insurance, warranty prices are not decided by how many trees are in your yard, how old your garage is, crime rates, and whether or not there is a police station across from your house.
If you need to use your warranty, there might be a small service fee, but this is usually much less than an insurance deductible. Also, your use of your warranty does not make renewal more expensive for you to purchase in the future.
Your home insurance is essential when a large disaster strikes. Insurance coverage allows you to fix a flooded basement, replace a hail damaged-roof, or replace a window that was damaged in a storm. Should your house burn down, you’re covered.
Home warranties are for the smaller things that happen much more often than disasters, thefts, and fires. Your insurance, for example, won’t cover a replacement water heater when yours dies. Some types of warranties also cover things like plumbing fixtures, appliances, air conditioner system components, and heating.
These smaller “costs” are actually what homeowners spend the most of their money on. A home warranty can save you that money.
On a similar note, some homeowners forego home warranty, relying instead on an installation, product, or company warranty. For example, your contractor might guarantee his or her tiling work for three years. However, these warranties have limitations as well:
- Product warranties guarantee coverage in the event of a product part failure. Part failure, however, is not the only reason your washing machine stops working. If the machine is fried during a power outage, your product warranty may not cover it. Your home warranty will.
- Company warranties on electronics, especially newer systems like whole-home automation, may actually exclude nearly all the things that could damage them. When computerized components are a part of your home, you want them to be covered as well.
- Installation warranties may only cover damage based on failure due to poor workmanship. If the product itself fails, you’ll rely on your home warranty instead.
A home warranty is a unique type of coverage, filling the gaps of other policies.
Another differing aspect of home warranties is the level of flexibility you can enjoy. Many insurance companies will negotiate on coverage but only to a certain extent. You have to pay the amount that it will take to replace your home, and sometimes you can only reduce your benefits slightly by adjusting things like liability and personal property coverage.
When you choose a home warranty, you can adjust coverage to fit your needs. For example, you can choose basic coverage of essentials like water heaters, furnaces, and air conditioning units. You could also extend your coverage to include kitchen appliance repairs. Whole home coverage provides the most benefits. You can choose the type of warranty that best matches your budget and lifestyle.
Another aspect of flexibility is the possibility of transferring your policy to another homeowner should you choose to sell your home. You can’t transfer all the money you paid into home insurance, but if you have nine months left on your home warranty, you can give the home warranty to a buyer as part of the deal.
This can be a very appealing benefit for people who are shopping for a new home. When living in a competitive real estate market, even investing in a basic warranty can give you an edge over other sellers.
Choosing a home warranty may seem like an “extra” cost. When you consider the extra cost of the little repairs and appliance failures that inevitably come with home ownership, you’ll see that the home warranty is actually a wise financial choice. For more information about what coverage and services we offer, contact us at High Tech Home Warranties.