Wednesday, January 16, 2013

Home Warranties: Are They the Same as Home Insurance?

April 2, 2006 Tornado Outbreak, O'Fallon, Illi...
 (Photo credit: Wikipedia)
Both home warranties and homeowners insurance policies can be purchased to protect the home. However, since the coverage of home warranties and homeowners insurance policies do not extend to the same potential outcomes, there is no conflict in purchasing both at the same time. One is used to protect the home's amenities against routine depreciation, while the other is meant to protect the same against emergencies such as burglars and natural disasters. 

Contingencies Covered Under Home Warranties


Home warranties are purchased to cover the cost of either repairing or replacing the home's appliances and systems in case these fail due to the normal depreciation caused through prolonged use. Examples of covered appliances tend to include ceiling fans, dishwashers, oven, and range. For comparison, common examples of covered systems can include the home's ventilation ducts, its heating and cooling systems, plus its electrical system. Bear in mind that appliances and systems covered under home warranties do not include outdoor amenities such as pools and sprinklers. Furthermore, it is important to note that not all home warranties cover the same contingencies, meaning that research is needed to understand their limitations. For example, some home warranties cover refrigerators, while others do not.

Contingencies Covered Under Homeowners Insurance Policies


Homeowners insurance rates are paid so that homeowners insurance policies can be used to protect the home against both man-made and natural disasters. Examples can include fire, floods, burglaries, earthquakes, hurricanes, and even legal liabilities. Although homeowners insurance policies sometimes cover the costs of either repairing or replacing appliances and systems, that damage must be traceable to such disasters. Homeowners insurance policies tend to be similar to home warranties in the sense that not all insurance policies cover the same contingencies and amounts. As a result, consumers must take extra precautions to find out the exact details of homeowners insurance policies under consideration before making their final purchasing decisions. For example, some homeowners might be able to decrease their homeowners insurance rates by eliminating coverage for contingencies that are never going to come up. After all, there is little to no point in purchasing coverage for hurricanes if the individual is living inland, far from the coast.

Reason to Purchase Both Home Warranties and Homeowners Insurance Policies


Since home warranties and homeowners insurance policies do not cover the same contingencies, there is little fear of encountering redundancies. Instead, home warranties and homeowners insurance policies can both be purchased to prove comprehensive coverage for a home and that home's contents. Contingencies that end up being ignored under one protection measure can be handled using the other, meaning that the homeowner is never at a loss for protection.

Conclusion

In the end, it is important for individuals to remember that home warranties and homeowners insurance policies can sometimes prove too expensive to remain worthwhile. Determining the exact point at which the price crosses that line is dependent on both the cost should the covered contingencies come to pass and the chances of those covered contingencies coming to pass. The more expensive the cost and the higher the chance that the covered contingencies may occur, the smarter the choice to purchase home warranties and homeowners insurance policies becomes.


Stephen Catalano is a home insurance consultant with extensive experience in the field. His articles mainly appear on insurance websites.

1 comment:

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