Last updated on May 16th, 2017 at 02:40 pm
If you own a home, you probably already have a homeowners insurance policy. If you’re shopping for a new home, you may have been approached about buying a home warranty. While both offer protection for your home, they’re not the same thing and it’s important to understand the difference between a home warranty versus home insurance.
What You Should Know
The first thing to know is that a home warranty generally helps to cover appliance or equipment breakdowns, whereas home insurance helps you repair your home from unexpected damage or situations, like fires and theft.
Another thing to know – if you’re financing the purchase of your home, most lenders require homeowners insurance, but home warranties are typically optional. Still, a home warranty could be a smart purchase depending on your own situation because it might help you control your budget for home repairs.
How Each One Works
When you buy a home warranty, you purchase a service agreement that pays for the repair or replacement of things inside of your home when they break down. Compare that to home insurance, which covers your home’s actual structure and your possessions. You should check your own home insurance policy to find out exactly what it covers.
Here’s an example to help you understand the difference: your insurance policy may help to replace your washing machine if it’s damaged by a fire, but a warranty may help replace it if it simply breaks down (however, it will depend on the terms of your service agreement).
If you do opt to purchase a home warranty, you can purchase different levels of protection. Basic warranties typically cover appliances, but you can even upgrade to cover things like a swimming pool. It’s also a standard practice for most warranties to include a modest deductible.
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