What are the Difference between Home Insurance and Home Warranties?

It is very easy to confuse home insurance and home warranty. As a matter of fact, very few people actually know the difference between the two. Most think they are the same, which is not true at all. Home insurance and home warranties are two completely different things that perform different functions. We'll begin by stating the difference in just one line, and then move on to details about both of these policies. A home insurance is a policy that covers the house as a whole and its belongings against natural disasters like fires, floods and earthquakes. A home warranty is a contract that offers repairs and replacements to the things in the house that are covered under the home insurance policy. However, the warranty is applicable only for belongings that are spoiled over time as a result of regular usage, which the home insurance does not cover. Thus you could call a home warranty a subset of a home insurance policy. Another thing to be remembered is that while a home insurance plan is a policy, a home warranty is not. It is a contract.

So how important are home warranty policies? And do you need them? Well, the answer is yes, they are quite important, and yes, you do need them. While we do not mean that your house will be the victim of a flood or a fire, the important thing here is to think of what you can do if something does happen. You cannot claim insurance if you are not covered in the first place. Like the adage goes, "prevention is better than cure", and "better safe than sorry", it is indeed a good idea to be covered than to worry about what to do after losing your house and/or belongings. Remember that these policies are being taken "just in case", so you don't have to struggle later. Of course, chances are very well that nothing will happen to your house and you won't even have to use the insurance or warranty, but it does not harm to have them.

So what kinds of cases are we actually speaking about here? To give you a clear understanding, let us look at a few examples of what a home insurance and a home warranty covers. Suppose your house is damaged by a flood or fire or an earthquake, the home insurance covers this. If you are burgled, it is covered by home insurance. If you are cooking and something spills over and causes a fire that damages your walls, not to worry, the home insurance has it covered. So these are the kinds of stuff the home insurance covers. Now suppose your refrigerator suddenly stops working, in which case the home warranty comes to your rescue. Same with the oven, the dishwasher, the central AC, the furnace and other similar things. So basically, any appliance that has stopped working because of normal usage is covered by the home warranty. It is thus important to remember the difference between the two, and go for the one that you feel is more important.