Differences in Home Warranty & Insurance
As a homeowner, it's important to understand the different types of protection and coverage available to you. There are homeowner insurance policies and home warranties. Each type of coverage is essential for various reasons. Learn why you should think about purchasing both, and what each does and doesn't cover.
Home Insurance
Homeowner insurance policies primarily cover any accidental damage to your home and possessions caused by:
- Fire
- Storms
- Theft
- Natural disasters
This type of insurance is required to obtain a mortgage because it protects both the interior and exterior of the structure. For example, if a tree falls on the roof or a water pipe breaks, your home is covered. It also provides general liability in case someone is injured on your property.
An important point to understand is that a standard insurance policy only covers structural damage to a house. The base policy doesn't include natural disasters like floods, hurricanes, or earthquakes. If your home is located in a flood zone, you will be required to carry flood insurance, and if you live in an area that's in danger of earthquakes, you may be required to have additional coverage. Additional forms of coverage can be expensive, so if you're purchasing a new home, it's vital to take these costs into consideration.
The policy will renew each year. Every plan has a deductible which is what you'll be required to pay if you make a claim. Just like health insurance, the higher the deductible, the lower your cost. Be sure to shop around for the best insurance coverage for your area.
New Home Warranty
Many homeowners confuse a home owner warranty service with an insurance policy that protects them in case of a loss. The purpose of the warranty service is to provide repair, service, and replacement for appliances. For example, if your refrigerator, dishwasher, or built-in microwave breaks they may be covered under the plan. In most cases, the contract is good for 12 months.
Before you buy any home warranty, read what's covered and what isn't covered carefully. Like insurance, this service can give homeowners peace of mind that they won't have to come up with hundreds of dollars if one of their covered appliances breaks right after they move in.
What's not included in a home warranty? Generally, components that are covered under a manufacturer's warranty. For example, if your new HVAC system fails, it would be covered under the original manufacturer's warranty.
Keep in mind, just because you purchase a home warranty doesn't mean you can have anything you choose repaired or replaced. Sometimes only a portion of the service call is included, or a percentage of the parts replacement. Each policy is different. Additionally, some companies require that you use only certain repair companies - so read the fine print before you sign the dotted line.
Builders Warranty
If you are looking to purchase a newly built home, ask the builder to see their builder warranty. Make sure to check and see if these main points are covered:
- Structural Warranty - This includes the overall integrity of the home. A good plan covers up to 10 years.
- Water Leaks - Caused by installed plumbing or built-in appliances like dishwashers that came with the home.
- HVAC systems - Besides the manufacture’s guarantee, your builder should cover their system for 2 years.
- Electrical systems - From wiring to the breaker boxes and thermostats, make sure you’re covered for 2 years.
- Plumbing - Ensure all original plumbing is covered for 2 years. This includes both kitchen and bathrooms.
As a homeowner, it's important to understand the different types of protection and coverage available to you. There are homeowner insurance policies and home warranties. Each type of coverage is essential for various reasons. Learn why you should think about purchasing both, and what each does and doesn't cover.
Choosing the right type of insurance can save you both money and stress in the future in case of a claim. For more information about what Pulte covers in their newly built homes visit our 10-year warranty page.
Contributed to Your Home blog by Carol Youmans
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Published 5.3.19