Home warranty vs. home insurance: What’s the difference?

A home is arguably the biggest and most significant purchase an individual or family will make in a lifetime. With a significant purchase comes a substantial list of questions, and one of the most common inquiries builders and real estate professionals will receive is: “What is the difference between my home insurance policy and a home warranty?”

 What a home insurance policy will protect

Policies vary by provider, but generally speaking, a home insurance policy covers damage due to identified risk that are sudden or accidental, such as a fire or a natural disaster, like high wind due to a tornado.  The damage may occur to personal property inside of the home or other major components of the building.

How do insurance policies differ from home warranties?

A home warranty other is a great option that fills in the gaps between insurance policies as they relate to a home’s systems and appliances. Separate from your homeowner’s insurance, a home warranty for pre-owned homes covers repairs to major systems and appliances in your home that malfunction or break due to normal wear and tear.

According to a Consumer Expenditure Survey from the 2002 U.S. Census, homeowners spend an average of $900 each year to repair their home’s systems and appliances. In addition, the average life expectancy of nine critical home appliances and systems is 13 years, and the likelihood of failure of one of these systems in a given year is 68%. (Home Repair and Remodel, Marshall & Swift L.P., 2004). A home system or appliance repair can range from $65 to $2,000, and a replacement averages $1,085. (Home Repair and Remodel, Marshall & Swift L.P., 2004)

Home warranty protection also gives homeowners access to a trusted contractor for repairs.