Home warranties vs. home insurance: Make sure you’re covered!
Depending on your situation, there may be talk about warranties, insurance and what exactly they do for you. Oftentimes, the terms builders warranty, home warranty, and homeowners insurance are the main topics of conversation.
A builders warranty covers anything that is permanent in the house, whereas a home warranty covers non-permanent items such as appliances. Homeowners insurance covers damage from natural disasters, burglary and other destructive events.
Although you may be unsure of what exactly each one does for you and your home, there’s no need to stress. We’re here to help clear up any confusion and lay out just what each of these are and how they can help you enjoy your new home.
This type of warranty usually comes with new home construction, a remodel or is just included with most newly built homes. It covers items that are a permanent part of the home which can include concrete floors, plumbing and electrical work.
Generally, this offers limited coverage on workmanship and materials for certain parts of your home. This could be your windows, heating, ventilation/AC (HVAC), plumbing and electrical. Your warranty should also tell you how exactly repairs will be made if anything happens.
What’s covered can also depend on the length of time that the coverage lasts. Coverage on the majority of the workmanship and components in your home expires after one year, and the coverage for things like your HVAC, plumbing and electrical usually lasts for two years.
The main coverage that lasts for a substantial amount of time would be for major structural defects. These would typically be things that make your home unsafe to be in or an issue that puts you in danger; this could be a collapsable roof or damage to your foundation. This coverage usually lasts for about 10 years.
What typically isn’t covered?
If your home has a major construction defect or needs substantial repairs, your warranty usually does not cover your out-of-pocket costs, like finding somewhere else to stay while the repairs are being made. So, if you had to replace the roof of your home and needed to move into a hotel during that time (unfortunately), your hotel expenses will not be covered by your warranty.
Issues with your household appliances, small cracks in your brick, tile, or drywall or items under your manufacturer's warranty are also typically not covered by your builders warranty.
This type of warranty is typically one year long but can be renewed and helps with the cost of repairing or replacing home systems and appliances. This also works with your homeowners insurance to protect things that your insurance doesn’t cover.
For homebuyers, this also can serve as a guarantee or incentive when offered by the seller. This stands to cover the cost of anything that breaks or needs repairs after the house is sold. Buyers aren’t usually financially prepared to take on these kinds of repairs, so since the seller would be paying the premium to have the policy, the new homeowner would just be responsible for paying the service charge. Definitely can take some weight off of your shoulders because buying a home can be complicated enough!
This type of warranty is also a great incentive in a buyer’s market since it takes away some of that stress from the buyer. And guess what? Even if the seller hasn’t offered a warranty, you can always request one during negotiations or get one yourself for more security later on!
Typically, this covers the service, repair or replacement of your major home appliances and systems. The exact items and systems that are covered will be listed in your contract so you know what’s included. This mainly serves to help minimize the expenses that come with fixing and repairing an appliance or home system.
Common systems that are covered:
- Water heater
Common appliances that are covered:
- garage door opener
- Garbage disposal
Although these are commonly covered items, be sure to check your specific plan to make sure it covers what you need it to.
What isn’t typically covered?
Home warranties usually do not cover structural items such as walls, windows and doors. Those issues would fall more under your builders warranty or your homeowners insurance.
If you have existing problems with an appliance or system, it will not be covered if the warranty is purchased after you have the issue. So, being proactive about getting these plans might save you some money in the future.
Your warranty also does not usually cover damages besides the ones to the actual system or appliance. If your dishwasher breaks and causes floor damage because of excess water, the warranty will not pay to repair your flooring. This can be good to keep in mind when thinking about what to save for, even if you have warranties or insurance.
Can you purchase a plan after closing?
If you didn’t buy a home warranty before closing on your home, don’t worry! You can actually buy a home warranty at any point, even after closing. (Pretty cool, huh?)
Although there are some cost and time benefits to purchasing a warranty before moving in, there are also some benefits to waiting until after. Once you’re actually in your home and able to check out the appliances and systems that you have, you should get a better idea of what kind of coverage you might need. You also might have more time to find the exact warranty you really like and need for your new home.
Now, to talk about homeowners insurance. While your home warranty mainly has you covered for normal wear and tear of your appliances and systems, your homeowners insurance focuses more on covering you from unexpected damages or natural disasters.
Homeowners insurance is also usually required for you to have by your lenders. Why, you may ask? This is because your lender technically has a financial stake in your home while you’re making payments. So not only does this insurance protect you if something happens, it protects your lender, too. This way, the risk of your lender losing money if something happens is much lower.
Usually, damage from things like fire, burglary or weather events is covered under your insurance.
Here are some common items that are covered:
- Heating and cooling systems
- Kitchen appliances
- Personal possessions like furniture and clothing
- Outbuildings on your property, like your garage or shed
- Outdoor items such as grills, playsets or fences
You also are typically covered as far as living expenses should you need to relocate for a period of time for repairs to be made to your home. You’ll want to double-check the plan you purchase to make sure the items you need covered are covered under that particular one.
What typically isn’t covered?
Although your homeowners insurance can cover a lot of damage that could happen to your home, there are some things it usually does not cover. Typically, if the damage is considered to be preventable or caused by a lack of maintenance on the owner’s part, your plan might not cover that. However, be sure to read the fine print.
Things that are usually not covered due to lack of maintenance:
- Roof leaks
- Water damage
- Termite damage
- AC wear and tear
But remember, It’s important to check the fine print on what exactly is covered in your plan because the cause of damage might determine your coverage. Even some items listed above, for certain reasons, could be covered even though they typically aren’t. Checking for exact coverage and even repair cost limits could help you know how secure you are if your home gets damaged.
Ready to be a warranty and insurance holder?
If you’re ready to take on a builders warranty, home warranty or homeowners insurance, it’s time to discuss your needs with your realtor and lender. They’ll help point you in the right direction for what exactly you need and where to get it from.
Find a movement loan officer near you to get the knowledge you need!