Home Warranty vs. Home Insurance

Insurances are a necessary evil. They will protect you against unwanted and unexpected disasters. Whether they are due to natural causes (wind, water, earthquake, explosion, lightning etc.) or whether they are due to vandalism or robbery, a home insurance will help you pay for the damaged and lost items. But can you insure yourself in case something breaks down in your house due to old age? In the United States we are lucky to have home warranty. The home warranty will insure damages as a result of, for instance, a burst pipe.

What is a home warranty exactly?
A home warranty is a policy that insures things that can break in the house. Imagine you have a geyser and it bursts. Not only have you got the water damage in the house, which you can claim from your home insurance, but you will have to replace the geyser as well, and that geyser is costly. In that instance it is useful to have the home warranty, as you will now be able to replace the geyser. A home warranty is initially meant for your electrical wiring, your piping (plumbing), geysers and even stoves and ovens. Basic roof maintenance, washing machines, driers, microwaves, dishwashers and fridges can often be insured as well, but at a premium.

When do you need a home warranty?
A home warranty is highly advisable when you are the owner of a property. Not only will it help you pay the bills when something major breaks in the house, but it will also help sell your house easier, as the buyer knows that when something needed to be replaced it would have been. And he knows that the appliances that will remain in the house are in good working order. You might not need it for a brand new building, but still, even in a new house you might have a pipe burst or a washing machine that no longer wants to be of service.

What are the costs of a home warranty?
That very much depends on the insurance company you choose and all the extras you would like to insure. It is advisable to do some homework and compare various policies with each other to find the best option available. Not only look at the policy, but also scrutinize the fine print. It can be that certain insurers will indicate that when an appliance is a certain age you might only get a certain amount and not the full replacement value of a new one.

If something is broken in the house that needs repairs you call the home warranty insurance company, who will call, for example, a plumber. The plumber will come and investigate and will fix the problem. Every time there is a call out to your address you will have to pay a service fee. Also the callout fee can vary from insurer to insurer.

House insurance is extremely important
Most mortgage providers are not prepared to organize a bond if you do not want house insurance. This insurance is a guarantee that when disaster strikes, damages will be paid. It preserves the value of the property. Natural disasters like wind; water, lightning or a falling tree can cause major damage to the house, but please be aware that certain insurers will exclude Acts of God, such as earthquakes or tornados. You will still be able to insure for that, but of course, only at a major premium. But if you live in an area where tornados and earthquakes occur on a regular basis, then you have no choice but to pay the premium. Also be aware of changes in your area. If you live in a relatively disaster-free area and, for instance, oil and gas companies have identified that they need to drill in your area, make sure that your insurance will cover possible damage to your property as a result of this drilling.

What else is covered with house insurance?
Not only the foundation of the house is insured with house insurance, but also the contents, although your valuables like jewelry, expensive collections, antiques, etc, are often excluded and can only be insured at a premium.

And, as if that is not enough, you may also need to be insured for public liability to ensure you can pay the medical bills of a third person in the event that they are injured on your property. Liability is important if you or any of your family members break someone else’s possessions. The best example is of course the broken window while playing baseball, or accidentally damaging an antique.

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