Do You Need Homeowner’s Insurance, a Home Service Contract, or Both?

When it comes to protecting your home, it’s best to follow a tried and true motto: better to be safe than to be sorry. That’s why homeowner’s insurance is crucial for homeowners in the case of any unexpected emergency. But homeowner’s insurance isn’t the only coverage you want to think about — a home warranty can be just as important as homeowner’s insurance for protecting your assets. Before choosing your home’s protection, you’ll want to consider both options and their different coverage policies.

Homeowner’s insurance is typically mandatory to have when purchasing a home with a mortgage. This insurance can protect your home in the case of exterior damage, including the structure and frame of the house, as well as interior damage, including cherished furnishings and home accessories. Consequently, homeowners insurance becomes most essential in covering your home for unforeseen events like fires, theft, and natural disasters. In terms of payment, insurance policies are usually renewed annually, and give you a deductible (or the remainder of a damage claim cost) after covering the additional damage costs.

A home service contract (or home warranty), however, can protect you from several other unexpected costs that insurance typically doesn’t cover. These service contracts can protect your appliances, electrical wiring, plumbing, HVAC systems, and more from failures due to normal wear and tear—coverage that is not typically provided by a homeowner’s insurance policy. You can purchase home service contract plans that limit coverage to specific items as well, including some that solely protect HVAC systems or special appliances like swimming pools.

Home service contracts can be bought at any point during homeownership. Once you have one, you’ll only have to pay a small fee for each repair visit — the rest is covered by the service contract. A recent national survey found that 62 percent of respondents said they’d spent money replacing or repairing broken home appliances in 2016. Of these, more than a third reported spending $300 or more doing so.

Home service contracts are an investment in peace of mind, knowing that if something breaks or malfunctions, you won’t face a staggering repair bill. Even better — a lot of home service contracts are transferable, and therefore can increase the value of your home if you’re selling or considering it in the near future.

Whether it’s significant loss from theft or a broken heater in a freezing month, homeowner’s insurance and warranties protect your home and your wallet. It is important to consider their unique advantages and learn how they can best work for you and your home.