Home insurance vs home warranty: A comprehensive comparative study

Posted on: Jan 17, 2023 | | Written by:

Home insurance vs home warranty: A comprehensive comparative study

Published on January 16, 2023. EST READ TIME: 3 minutes

Buying a home is a tough affair and not everybody’s cup of tea. You have to consider several aspects to ensure optimum protection and proper maintenance in the long run. You must ensure to issue a home insurance policy or property insurance for best maintenance. However, most of us are unaware of the basic differences between home insurance and home warranty. This article will highlight all the relevant aspects of both house insurance and a home warranty for your better understanding and decision-making.

What is meant by a home warranty?

A home warranty implies a special service contract that offers coverage for repairs, replacements, and maintenance of the entire home systems and other household appliances in use. Depending on the circumstances, you either need to pay the charges monthly or yearly and enjoy a fixed, flat rate on every service call you make.

If any appliance or a system like the security system of your house that is covered by the concerned warranty plan suddenly breaks down, the warranty company automatically sends one or more technicians, as per requirement, to fix the issue. All you need to pay is the fee for the service call.

A standard contract is quite reasonable and offers enough coverage and a claim limit. To know the exact details, you need to consult the respective company, as these limits vary from one company to another.

If you ensure to purchase a home warranty plan as part and parcel of your real estate transaction, you can enjoy its coverage benefits from the very beginning. However, if you seek it after already enjoying the ownership, you need to wait for around 15-30 days to enjoy the coverage.

Inclusions of home warranty

A home warranty covers all the systems and appliances that have been installed in a house, both pre-owned and new. Most of these companies offer three basic varieties of warranty plans:

1. Appliance plans, covering fridges, micro ovens, washing machines, etc.

2. System plans, covering systems like electrical, plumbing, and HVAC.

3. Combination plans involving both systems as well as appliances.

Most companies allow you to add coverage in exchange for an additional charge for items not included in the original plan. Some of the most common add-ons include spas, pools, lawn sprinklers, wells, and any additional appliance like a second air conditioner, washing machine, etc.

What is meant by home insurance or homeowner’s insurance?

A home insurance policy is a special variety of property insurance that offers protection against damages and losses caused by certain typical types of perils mentioned in the concerned plan chosen. Any standard home insurance offers four basic coverage variations:

1. Home structure coverage:

This implies coverage for repairing and/or rebuilding the concerned house because of any damage or destruction by any covered peril. Most plans even offer coverage for garages, tool sheds, decks, etc., as per applicability and requirement.

2. Personal belongings coverage:

As the name suggests, this plan offers coverage to your clothes, jewellery, sports equipment, furniture, and any other personal belongings in case these get destroyed, damaged, or stolen by any covered peril(s).

3. Liability protection:

This is a special protection against any third-party lawsuits for damage, injury or destruction of other people’s property that the concerned policyholder, his/her family member(s) or pet(s) may cause.

4. Additional living expense coverage:

If your house becomes inhabitable because of any covered peril, this plan will offer coverage for your food and lodging expenses incurred during the course until your house gets resettled.

Inclusions of home insurance

The most important and popular home insurance offers coverage for home, liabilities and belongings and protects against sixteen major perils and disasters:

1. Lightning and fire,

2. Hail and windstorms,

3. Explosion,

4. Civil commotion and riots,

5. Damage caused by any aircraft,

6. Any vehicle-caused damage,

7. Smoke,

8. Malicious vandalism,

9. Theft,

10. Volcanic eruption,

11. Damage caused by any falling object, natural or otherwise, but not self-inflicted.

12. Damage caused by sleet, ice, or snow.

13. Any unprecedented damage caused by any burning, cracking, steaming or tearing of the air conditioner or central heating system or the fire protection system.

14. Freezing of the plumbing system HVAC ducts or the fire protection system.

15. Any unprecedented accidental damage caused by an artificially generated electrical current.

A standard home insurance plan even offers coverage for your personal liabilities to damages and/or injuries to any other people who don’t live with you in that house and also their property, during their temporary stay in your property. Some of the most popular liability claims in this respect include falling trees, any major or minor home accidents, pet-inflicted injuries, injured domestic hands, intoxicated guests, etc.

Depending on your residential address, it is wise to either add or buy a separate plan for earthquake and flood coverage. You can seek professional guidance or consult the concerned insurance company and its customer care service for further clarification.

Factors that determine the costs of home insurance and home warranty

Some of the common factors that determine the costs of home insurance include the location and area of the concerned house, the rebuilding costs of the house, the total value of your personal belongings, the size, conditions, and features of the house, the coverage and deductible limits selection, home insurance claim history, your CIBIL, credit score, as well as your marital status.

Moreover, if you possess any listed dangerous dog breeds, like Akita, chows, Doberman, pit bull, a wolf hybrid, etc., the value of your home insurance premium might be affected.

In the case of a home warranty, the cost is determined by the number and the quality of appliances you wish to cover under the plan.

Differences between home insurance and home warranty:

HOME WARRANTY	HOME INSURANCE
Not compulsory	Essential for the concerned lender
A special service fee is required	A deductible is essential
A special service contract that offers coverage for home replacements and repairs	It is a special insurance coverage against listed perils and other natural disasters
It covers all the household systems and appliances, as per the plan coverage	It covers the home structure, liability protection, personal belongings, and other additional expenses
It covers cooling and heating systems, electrical and electronic appliances, electrical systems, plumbing systems, HVAC	It covers storm damage, theft, fire damage, water damage

Conclusion

This is a comprehensive analysis of the important aspects of home insurance and home warranty. It is better to purchase both to enjoy complete protection. Depending on the circumstances, your current income, financial status and other requirements, you can do thorough research and proceed to protect your beloved home in the best possible manner.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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