When you’re buying a home, you know you need homeowners insurance. But what about a home warranty?
Contrary to popular belief, a home warranty is not an insurance policy. It is a contract covering repairs and replacements on your home’s appliances and/or mechanical systems, usually for a period of one to two years.
The average cost of a home warranty is $350 to $500, and it typically covers things such as kitchen appliances, water heaters and furnaces. Homeowners with a home warranty call a service number for a repair and pay a small deductible with the rest of the cost of the repair covered by the warranty company. Many consumer groups say home warranties aren’t always a great deal. With a home warranty, you aren’t free to select the repair company — the warranty company has their own network of repair technicians. And you may have difficulty tapping your warranty if the item is worn out, had pre-existing problems or was improperly maintained.
Homeowners insurance, on the other hand, does not cover items on or in your home when they break or stop working — you’re responsible for maintenance. But it does provide financial protection against disasters for your home and what’s inside it. It protects your property and also provides liability protection in the event you or other members of your household cause injuries and/or property damage to other people. No homeowner should be without homeowners insurance.
