4 Major Differences between a Home Warranty and Home Insurance and Its Advantages

>> Apr 12, 2018


A home warranty is a residential service contract that covers the cost of maintaining the household systems or appliances for an agreed time period. Many people confuse it with a home insurance policy.
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Before getting either the warranty or insurance, it's best to understand what both entail.  Carrying out your own research before approaching any company that offers these services is important so that you have the right information.

Differences between a home warranty and home insurance     

  1. Different services – Though a home warranty bears similarity with the home insurance,the two offer different services. A home warranty preserves the functionalities of household systems while home insurance covers the loss of the home itself that may occur due to theft, fire or natural disasters.
  2. It is a short-term contract – A home warranty is normally a renewed annual contract that covers an agreement on the repair or replacement of major home appliances and systems that break down from normal wear. A home insurance contract is a long-term contract with a period of ten or more years that covers the entire home when damaged by the disasters clearly stipulated in the contract. 
  3. Only covers appliances and systems – Home warranties only cover the appliances and systems while home insurance covers even the lives of the family members who live in the house insured.     
  4. Does not cover disasters – A home warranty does not cover disasters but only covers things like breakages and malfunctions. The home insurance, on the other hand, covers natural disasters depending on what type of insurance you chose.

Bottom line:  The best home warranty is designed to cover the things that are not covered by a home insurance policy, especially the wear and tear of the appliances and systems.  This is the major reason why it is attractive to most home buyers.  

Can you be denied a home warranty coverage?

Home warranty companies can deny coverage for a few reasons. They may include:

  • The known damage that existed before the start of warranty coverage – A home inspection always reveals any damage on the home or the appliances. 
  • Poorly maintained home or appliances, or improperly installed household appliances – Poorly installed or maintained appliances will not be covered by a warranty contract because they are already too prone to damage. 

The home warranty cost

The home warranty cost differs depending on the company you chose and where you are located. Looking roughly at the figures that can be a guideline, a home warranty ranges between $300 and $600 per year. In addition to the annual premiums, the homeowners will also pay the service contractor fee known as service call fee.

Depending on the service provider, the fee can range anywhere between $40 and $100 for repairs. Most of the policies you will come across clearly state that if the cost of the repair is less than the fee, the homeowner pays.    

Being equipped with this knowledge allows one to make the right choices when getting a home warranty. Remember, a home warranty adds value to your home, so if you intend to sell it, then it's wise to get a warranty plan.

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