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The Difference Between Home Insurance and a Home Warranty

House protected by hands
A home warranty and a homeowners insurance policy are two different things. Both types of policies protect homeowners from financial liability if their home needs repair. However, each type of policy covers different systems in the home. Understanding the differences is important. Read on to learn more.

What's the Difference Between Home Insurance and a Home Warranty?

A homeowners insurance policy is a type of insurance that usually covers the structure of the home, while a home warranty is a contract that will pay for repairs to certain systems inside the home. Both policies require the homeowner to pay a deductible when making a claim. Both policies are usually offered on a yearto-year basis. Typically, a home warranty costs significantly less than a homeowners insurance policy.  

Are Homeowners Required to Have Both Policies?

Homeowners with a mortgage are required by their mortgage lender to hold a homeowners insurance policy. Lenders do not require homeowners to have a home warranty policy.

When the mortgage is paid in full, homeowners may decide for themselves whether they want to keep their homeowners insurance. Homeowners who pay for their house in cash are not required to have either type of policy. 

Do These Policies Come With the Home When It's Purchased?

Sometimes a home seller will pay for the home warranty policy as a gift to the buyer. This is common practice when a home seller wants to sweeten the deal for the home buyer.

In addition, a home builder may offer a home warranty policy to a home buyer for a newly constructed home. This practice varies from state to state. Homeowners insurance is usually paid for by the home buyer. Both purchases are made at the close of escrow so that the policies begin immediately when ownership transfers from one owner to another. 

What Does a Home Warranty Cover?

A home warranty will usually cover damage to the appliances and minor systems of the home. For example, the home warranty policy will pay to repair a home's stove if it breaks through normal wear and tear. The home warranty may also pay to repair a pipe that develops a leak.

The home warranty will not pay to repair the structure of the home, even if that damage occurred because of a covered event. For example, if a leaking pipe causes mold growth in the bathroom, the home warranty may pay to repair the pipe but it will not pay to repair damage to the drywall. 

Often, homeowners are given the option to add protections to their home warranty policy, based on their needs and the type of appliances they own. For example, many basic policies will not cover the refrigerator unless the homeowner pays extra. 

What Does Homeowners Insurance Cover?

Homeowners insurance usually pays to repair the structure of the home when a covered event occurs. Usually, a homeowners insurance policy will cover damage from wind, lightning, fire, smoke, and hail. Burglary and vandalism are covered events. Often, homeowners insurance will also offer liability coverage that pays legal fees if the homeowner is sued by someone who suffers an injury while on their property.  

Homeowners insurance also covers damage to the appliances in the home if that damage is caused by a covered event. For example, if the kitchen appliances are burned in a fire, the homeowners insurance policy will pay to replace the appliances. 

Sometimes the difference between homeowners insurance and a home warranty is not entirely clear. If you're a homeowner who has questions about the type of coverage offered by homeowners insurance, contact S.N. Anthony Insurance Inc. We're happy to answer your questions.