Many homeowners confuse homeowner's insurance and a home warranty. Homeowner's insurance covers both physical damage to the home and the property around it. For example, if a fire breaks out inside the house and causes more damage than the cost of the deductible, an insurance representative will assess the damage and make a claim. Similarly, a home warranty covers issues like a broken air conditioner, which don't cause significant damage to the home but are costly. Homeowner's insurance is mandatory if you have a mortgage but a warranty is not.
- Homeowners insurance is usually required when you carry a mortgage and covers such losses as damage from fires and storms.
- Home warranties are optional service contracts that can cover the repair or replacement of a variety of things including HVAC systems, plumbing, and pools.
- Some home insurance policies come with home warranties but that isn’t necessarily the norm.
“Taking up a home insurance policy might be mandatory but home warranty products are purely optional.”