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OverviewQuick RundownHome InsuranceHome WarrantyThe bottom line
When it comes to protecting your home, it's important to understand the different types of coverage available. Home insurance and a home warranty serve distinct purposes and provide different levels of protection. Below we'll explore the key differences between home insurance and home warranties, helping you grasp their unique roles in safeguarding your home and belongings. Understanding these differences will empower you to make informed decisions when it comes to protecting your most significant investment - your home.

Quick rundown

Let's start with a quick run down

  • Home insurance is a type of insurance policy that provides financial protection for your home and belongings in the event of unexpected events, such as damage or loss due to fire, theft, vandalism, severe weather, or other covered perils. It typically includes coverage for the structure of your home, personal belongings, liability, and additional living expenses, and is usually required by mortgage lenders
  • Home warranty is an optional contract that covers you in the event of unexpected problems with major appliances and systems in the home, such as HVAC, plumbing, and electrical.

It's important to understand that there isn’t a question of whether you should get one or the other, they aren’t equal. Most all homeowners have home insurance, as it is required to get a mortgage loan and provides more comprehensive coverage compared to home warranties. A home warranty is a supplemental protection for a home’s appliances available if desired. Let’s take a deeper look into each and what they cover.

Home Insurance

Home insurance typically consists of several types of coverage, including:

  • Dwelling coverage: This covers the structure of your home, including the walls, roof, floors, and other attached structures, in case of damage or destruction due to covered perils.
  • Personal property coverage: This covers your personal belongings, such as furniture, appliances, clothing, electronics and other items, in case of damage, theft, or loss.
  • Liability coverage: This provides protection if someone is injured on your property and you are found liable for their injuries or damages. It can also cover legal expenses if you are sued for damages.
  • Additional living expenses (ALE) coverage: This covers the cost of temporary living arrangements, such as hotel stays or rental properties, if your home becomes uninhabitable due to a covered peril.

Like other types of insurance, home insurance policies typically have deductibles, which is the amount you must pay out of pocket before the insurance coverage kicks in. Homeowners are usually required to carry home insurance by their mortgage lenders, and it is designed to help protect both the homeowner and the lender from financial loss due to unexpected events.

Home insurance is often included as part of your monthly mortgage payment, with a portion of the total amount due allocated toward the insurance premium. This means that instead of paying the insurance premium separately, it is incorporated into your regular mortgage payment. The mortgage lender then uses these funds to pay the insurance premium on your behalf to the insurance company. This arrangement ensures that your home remains protected by insurance, as required by the lender while spreading out the cost of insurance over the life of your mortgage. It's important to review your mortgage statement and understand how much of your monthly payment goes towards home insurance to ensure that you are adequately covered and budgeting for the associated costs.

It's important to note that home insurance coverage and costs can vary depending on factors such as location, coverage limits, deductible amounts, and additional endorsements or riders added to the policy. It's essential to carefully review your home insurance policy and understand its coverage and limitations to ensure you have adequate protection for your home and belongings.

Home Warranty

A home warranty is an optional service contract that provides coverage for repair or replacement of major home systems and appliances due to normal wear and tear. Home warranties provide homeowners with added protection against unexpected breakdowns or failures of covered items.

Home warranties are typically effective for a specific period, usually one year, and can be renewable. Homebuyers can purchase a home warranty themselves but may also receive a home warranty as part of a real estate transaction, provided by the seller. It’s common to see builders include a home warranty with the sale of new construction homes. If you’re a veteran using a VA loan to purchase a new construction home, the Department of Veteran Affairs requires builders to provide veterans with a 1-year builders warranty.

Homeowners can choose from different levels of coverage and may have the option to add on additional items or services, depending on the warranty provider. Home Warranties usually cover items such as:

  • HVAC systems (heating, ventilation, and air conditioning)
  • Electrical systems
  • Plumbing systems
  • Water heaters
  • Kitchen appliances (e.g., refrigerator, oven, dishwasher)
  • Washer and dryer
  • Other major systems or appliances in the home

When a covered item breaks down or fails, the homeowner can contact the home warranty provider, and they will typically arrange for a service technician to assess and repair or replace the item. Homeowners may be responsible for paying a service call fee or deductible for each claim, as specified in the home warranty contract.

The bottom line

While both home insurance and home warranties serve different purposes, home insurance is generally considered more essential for protecting your home and belongings against unexpected events. It provides coverage for a wider range of perils and typically includes liability protection, which is crucial in case of injuries or damages to your property. On the other hand, home warranties can offer supplemental protection for specific home systems and appliances, helping homeowners save on repair costs.

If you have questions about your current home insurance policy or are interested in exploring potential savings, give us a call. CapCenter has a in-house insurance team that shops can shop over 35 carriers to ensure our clients are in cost effective policies with solid coverage and can provide expert guidance and help ensure that you have the right coverage in place to protect your home and investment.