Question:
What is the difference between a home warranty and homeowner’s insurance?
Answer: The best way
to describe homeowner’s insurance and a home warranty is to compare them to a
car purchase.
When purchasing a car, you are
required to have insurance on the vehicle. This protects you financially if
anything were to happen to the car. The same thing is true with home insurance.
If your home experienced damage that is covered by the insurance company (for
example a fire), you would be compensated by the insurance company. A
home warranty, on the other hand, provides a guarantee for certain parts of the
home, depending on the home warranty policy you purchase.
When you buy a vehicle with a
warranty, the car manufacturer is guaranteeing that certain parts of the
vehicle will not break while the vehicle is under warranty. If a part does
break while under warranty, the car manufacturer will have the problem fixed at
no charge to you. The same is true of a home warranty. The home warranty
company will pay to fix anything that is covered by the warranty (for example
the furnace).
Once the home warranty expires, usually
after a year, most homeowners do not renew. This makes sense because you are
familiar with your home, and you probably have set aside funds for home
maintenance. Keep in mind that home warranties do not pay for everything. You
have to check the policy.
Homeowner’s insurance and a home
warranty may sound very similar, but they are two very different products.
Insurance protects the buyer from a catastrophic loss. A warranty protects
specific aspects of a home. You never hope to need either, but are thankful for
the protection they provide.
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