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Homeowners Insurance vs. Home Warranty

Homeowners Insurance vs. Home Warranty
Homeowners Insurance vs. Home Warranty

Buying a home is a big decision and investment. Just like any other purchase, you want to make sure you take the steps to properly protect it. Homeowners insurance and a home warranty are two ways to look out for your investment. They both provide an extra layer of coverage for you and your belongings that can give you some peace of mind. So if you’ve ever wondered about the difference between them and what they cover, here’s a closer look at the two and how you can benefit from both.

Homeowners Insurance

Though homeowners insurance isn’t required by law, it is often a requirement for the mortgage process. It provides a level of protection for the mortgage lender but also protects your investment. Most insurance plans cover the structure of your home and your belongings from specific incidents, including theft and damage from certain weather events. This means that policies will often cover the cost to repair any destruction to your home from a storm or replace missing belongings that are stolen. And if your house becomes uninhabitable due to a covered incident, the policy will also cover the cost of living (shelter and food) for the time of repairs.

However, homeowners insurance doesn’t cover the cost to replace appliances that stop working due to a technical problem, age, or issue that isn’t related to weather damage. The policy can cover the cost if, say, a tree fell through your kitchen and damaged your fridge, but it wouldn’t provide any coverage if the appliance simply stopped working. This is where a home warranty would come in.

Home warranty

Home warranty protects your home’s appliances and built-in systems, offering financial assistance if they should ever stop working. Unlike homeowners insurance, these policies cover the damage that occurs due to everyday wear and tear. Coverage can include appliances like your fridge, microwave, dish washer, and washer and dryer, and systems like your HVAC, plumbing, and electrical. You can also opt to add additional coverage for other appliances and systems, including pools and a second AC unit if you need it.

Home warranty’s come at either a monthly or yearly fee, allowing you to choose the one that works best for you and your financial situation. Additionally, when an appliance or system does stop properly functioning, you do pay a service fee that covers the cost of a technician’s professional assessment of the issue. However, even with these two fees, having a home warranty can help save you thousands of dollars each year since you’re not on the hook for the full cost of repairs. For example, if your AC stops working six months after you move into your new home, the warranty can cover the cost to either repair the broken system or to replace it with a new one if the old one can’t be fixed.

The bottom line

As a homeowner, you are entirely responsible for the upkeep of your home and your property. There’s no property management to help should you have a pipe burst or appliance stop working, so it’s a good idea to purchase both homeowners insurance and a home warranty. The two work together since one can cover the gaps in coverage from the other, and they can go a long way to protect you and your belongings when you need them the most.

It’s important to note that coverage will differ from policy to policy, so be sure to speak with your provider to better understand what is and isn’t covered.

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Kimmer Plunk

Based in Memphis and serving clients in West Tennessee and Northwest Mississippi. Serving others is a reward of its own and part of what makes me happy, and I've been doing that for 30 years through various activities including Girl Scouts, PTO, various board positions, unhoused ministry, and professional, award-winning teaching. I treat others the way that I want to be treated including being readily available, listening to your desires, answering your questions thoroughly, and walking you through the home purchase process. My ultimate goal is to see that you find the home of your dreams and experience the least amount of stress during the process.

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