Home insurance protects the policyholder’s home and personal property against common disasters, like fires and storms, but it has plenty of gaps in its coverage. Home warranty plans attempt to fill some of these gaps, but they have some complex rules that homeowners need to be aware of. Here’s a closer look at a home warranty vs. home insurance.
What is a home warranty plan?
Home warranty plans are a contract between a homeowner and a home warranty provider. Home warranty companies agree to repair or replace damaged home systems and appliances covered under the plan if they fail while the policy is active. However, these plans tend to have a lot of fine print that can limit their utility.
Difference between home warranty and homeowners insurance
When you buy homeowners insurance, you’re making an agreement with an insurance company, which is similar to home warranty plans. The difference between a home warranty and home insurance is what is covered. Home insurance pays for home repairs if the policyholder’s property or possessions are damaged due to fire, storms, vandalism, or similar disasters. But they don’t cover costs associated with routine wear and tear. If an appliance breaks down, that’s the responsibility of the homeowner.
Home warranty plans are supposed to cover the breakdown of appliances and systems, like an HVAC system. The best home warranty companies will send a technician out to inspect the damage and, if appropriate, repair or replace the item. But the policy terms often hide a lot of caveats that can make it difficult to cash in on these policies.
How much does a home warranty cost?
Home warranty plans usually cost several hundred dollars per year, but the exact price varies depending on the home warranty company in question and which plan the homeowner chooses. Some plans only cover home appliances or home systems. Others use an a la carte approach where homeowners can choose what they want covered and what they don’t. All of this will affect the annual cost.
If the homeowner needs to take advantage of their home warranty, there’s usually an additional service charge. This is often somewhere between $75 and $125 per visit. If multiple technicians need to assess the problem, the homeowner could end up paying this fee multiple times.
What do home warranty plans cover?
The answer to the question “What does a home warranty cover?” isn’t all that straightforward, but generally speaking, they usually cover the following.