If you own a house, you need homeowners insurance to pay for repairs or stolen belongings. Many people believe that homeowners insurance will cover any necessary repairs, but it actually applies only in limited circumstances. A home warranty can provide protection in other cases.
What Does Homeowners Insurance Cover?
Homeowners insurance will pay for losses caused by a covered peril, such as a storm, fire, theft or vandalism, up to the policy’s limits. Depending on the coverage you choose, your policy may cover replacement cost, which is the amount of money required to purchase a new identical or substantially similar item, or actual cash value, which takes depreciation into account.
What Does a Home Warranty Cover?
A home warranty is not insurance, but rather a contract that a homeowner signs with a home warranty company. It will pay to repair or replace a broken appliance that is not covered by a separate manufacturer’s warranty.
A home warranty may cover major systems, such as HVAC, electrical and plumbing, as well as major appliances, such as a refrigerator, stove, oven, washer and dryer. Many companies offer basic plans with limited coverage and allow homeowners to add optional coverage for an additional fee. A home warranty may only pay to repair or replace appliances or parts in certain circumstances, and a broken appliance will not necessarily be replaced with one that was made by the same manufacturer or that has the same features.
Home warranties often exclude coverage for appliances or systems that weren’t well maintained. If you bought a house and the previous owner didn’t take care of something, a home warranty might not cover repairs even if you performed all recommended maintenance after you purchased the house.
Who Makes Repairs?
Some warranties allow homeowners to choose a repair company, while others work with a network of service providers. When a homeowner files a claim, the home warranty company sends a local contractor to the home to inspect the problem, decide whether repairs are required and covered by the warranty and complete covered repairs.
How Much Does a Home Warranty Cost?
The cost of a home warranty depends on the type and size of the home, the location and the coverage chosen. The homeowner must pay a service fee when a contractor comes to inspect a problem, whether the issue is covered by the warranty or not. If two different types of contractors, such as a plumber and an electrician, are needed to complete repairs, the homeowner may have to pay a fee for each.
Is a Home Warranty Right for You?
Even if you have homeowners insurance, there are a lot of things it won’t cover. A home warranty can protect you from large and unexpected repair bills. Before choosing a home warranty, research several companies and find out what each of their planscover and how much the premiums and service fees would be so you can make an informed decision.
