What is the difference between home warranty vs home insurance?

As a homeowner or a potential home buyer, it's important to understand the difference between a home warranty and home insurance. While both provide some level of protection for your property, they serve different purposes and cover different areas of your home. In this blog, we will explore the three main differences between home warranty and home insurance, and when you need each one.

Difference #1: Coverage Areas

The first and most significant difference between home warranty and home insurance is the coverage areas. Home insurance provides protection for the structure of your home, as well as your personal property inside it. It covers damages caused by natural disasters, theft, fire, or any other covered perils. In contrast, a home warranty covers the major systems and appliances in your home, such as your HVAC, plumbing, and electrical systems, as well as your major appliances like your refrigerator, oven, and dishwasher. It's important to note that a home warranty does not cover structural damage or personal property.

Difference #2: Buyers vs. Investing

The second difference between a home warranty and home insurance is who typically purchases them. Home insurance is usually required by mortgage lenders and is often purchased by homebuyers as part of the closing process. A home warranty, on the other hand, is typically purchased by homeowners or real estate investors to protect their investments. A home warranty can be a valuable investment for those who are purchasing an older home or a property that has older systems and appliances.

Difference #3: New Construction

The third difference between a home warranty and home insurance is when you need them. A home warranty is typically purchased when you buy a home, while home insurance is required before closing on a home. However, some home builders offer a warranty on their newly constructed homes, covering any defects or issues that may arise in the first few years of homeownership. In this case, the home warranty is included in the purchase price of the home. Mortgage lenders often require home insurance, but it's also a wise investment for any homeowner to protect their property against unforeseen damages.

When Do You Need a Home Warranty?

If you're purchasing an older home or one with older systems and appliances, a home warranty can be a valuable investment. It can provide peace of mind and save you money if a major system or appliance breaks down. Additionally, a home warranty can protect your investment property and help you avoid costly repairs if you're a real estate investor.

When Do You Need Home Insurance?

Mortgage lenders require home insurance and is also a wise investment for any homeowner to protect their property against natural disasters, theft, fire, or any other covered perils. Home insurance can cover the cost of repairs or rebuilding your home if it's damaged or destroyed.

When Can You Cancel?

You can cancel a home warranty or home insurance at any time, but you may be subject to cancellation fees. A home warranty is typically renewed annually, while home insurance is renewed every six months to a year. It's important to review your policy regularly and make changes as needed to ensure you have the right coverage for your property.

In conclusion, a home warranty and home insurance serve different purposes and cover different areas of your property. Home insurance protects the structure of your home and personal property, while a home warranty covers major systems and appliances. If you're a homeowner or real estate investor, it's important to understand when you need each one to protect your property and investment.