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

Home warranty plans and home insurance are not the same. Home insurance covers damage from things like fire or theft, while a home warranty plan helps pay for fixing or replacing things in your home that break from regular use, like appliances or heating systems. This article will explain the differences and help you decide which one you might need.

See also: Top insurance companies in India

Why is it important to understand the difference?

Understanding the differences between home insurance and a home warranty can help you avoid paying for unnecessary coverage. Home insurance protects you from big costs caused by disasters, while a home warranty covers the cost of fixing or replacing important home systems and appliances. By knowing what each type of coverage does, you can find any gaps in protection and decide if you need both. This knowledge helps you avoid unexpected expenses and choose the best coverage for your needs and budget, giving you peace of mind that you’re well protected.

What is a home warranty plan?

A home warranty is like a service contract that helps pay for fixing or replacing major appliances and systems in your home when they break down from regular use. It usually covers things like your refrigerator, stove, dishwasher, and heating and cooling systems, as well as plumbing and electrical issues. You pay either every month or once a year for the warranty and may have to pay a fee each time you need a repair. However, it doesn’t cover everything; for instance, it won’t pay for damage from accidents, lack of maintenance, or problems that existed before you got the warranty.

Duration of home warranty plans

Home warranty plans usually last for one year. Many companies let you renew your plan each year, and some even offer discounts if you choose to pay for several years at once.

Cost of home warranty plans

Home warranty plans generally cost between ₹15,000 and ₹30,000 per year for basic coverage. If you want more extensive coverage, the cost can go up to ₹40,000 to ₹60,000 per year. For those who prefer to pay monthly, standard plans usually cost between ₹1,250 and ₹2,500, while more extensive plans can range from ₹3,500 to ₹5,000 a month. Additionally, each time you need a repair service, there is typically a fee of ₹1,000 to ₹2,500.

Process for filing claims for repairs or replacements

To file a claim with your home warranty plan in India, follow these simple steps. First, check your plan to see what’s covered and what isn’t, including any limits on how much they will pay for repairs. If something breaks, contact your warranty provider through their website, phone number, or email. Be prepared to describe the problem and provide any needed information, like model numbers or photos. You’ll usually need to pay a fee for the technician to visit. The technician will then come to check the problem and see if it’s covered by your warranty. If it is, they’ll either fix it or suggest a replacement. Keep track of all your communications and make sure you’re happy with the repair. Finally, the warranty provider will decide whether to approve or deny your claim based on their findings and your plan details. If approved, they will pay for the repair or replacement as outlined in your plan.

Common coverage areas of home warranty plans

Here’s a list of what home warranties often cover:

• Electrical systems: Wiring, switches, outlets, and panels.
• Plumbing systems: Pipes, faucets, and fixtures.
• Heating and cooling systems: Furnaces, air conditioners, and ductwork.
• Water heaters: Both regular and tankless water heaters.
• Kitchen appliances: Refrigerators, ovens, stoves, dishwashers, and built-in microwaves.
• Laundry appliances: Washing machines and dryers.
• Garbage disposals: Units under kitchen sinks.
• Garage door Openers: Mechanisms for opening and closing garage doors.

Optional coverage

• Pool and spa equipment: Pumps, heaters, and filters.
• Well pumps: Pumps for drawing water from wells.
• Septic systems: Parts of septic tanks and related systems.

Common exclusions of home warranty plans

Home warranty plans often don’t cover some things. Here’s a list of what’s usually excluded:

• Pre-existing issues: Problems that were already there before the warranty started.
• Lack of maintenance: Damage from not taking care of items properly.
• Cosmetic damage: Things like scratches or dents that don’t affect how the item works.
• Non-mechanical parts: Parts like handles, knobs, or shelves.
• Secondary damage: Problems caused by a broken item, like water damage from a leaky appliance.
• Commercial appliances: Items meant for businesses, not homes.
• Natural disasters: Damage from events like floods, earthquakes, or storms.
• Unapproved repairs: Fixes done without the warranty provider’s permission.
• Code violations: Repairs needed to meet building codes.
• Modifications: Changes or upgrades to the original system or appliance.

Pros and cons of home warranty plans

Pros

Having a home warranty can be really helpful in several ways. It gives you peace of mind by covering the cost of repairs and replacements, which reduces stress. It can also save you money on expensive repairs for major home systems and appliances. The warranty provider handles finding and scheduling service technicians, making it more convenient for you. Plus, having a warranty can make your home more appealing to potential buyers because it offers protection against surprise repair costs. It also helps with budgeting by covering unexpected repair expenses.

Cons

Home warranties have some limitations. Not all repairs or replacements are covered, and there might be exclusions or limits on what the plan will pay. You also have to pay a fee for each service visit, which can add up. The approval process for repairs can be slow, causing delays in getting things fixed. You generally can’t choose your own repair technician; the warranty company will assign one. Additionally, claims might be denied for reasons like lack of proper maintenance or pre-existing issues.

What is home insurance?

Home insurance, or homeowners insurance, is a type of property insurance that helps protect your home and its contents. It covers things like damage to your home from events like fire or storms, loss or damage of your personal items, and liability if someone gets hurt on your property. It typically includes coverage for the structure of your home, personal belongings, legal costs if someone is injured, and extra living expenses if you need temporary housing because your home is damaged. This insurance helps cover unexpected events like natural disasters, theft, vandalism, and personal liability.

Read also: Home insurance: Everything you want to know

Duration of home insurance policies

In India, the length of home insurance policies can vary based on what you need. If you’re only covering the building structure, policies can last from 1 to 10 years. For just home contents, they usually last between 1 and 5 years. If you want coverage for both the building and contents, policies can also range from 1 to 10 years. Choosing a longer policy might offer benefits like discounts on premiums and less hassle with yearly renewals.

Cost of home insurance policies

The cost of home insurance in India depends on a few things, like how much coverage you need and any extra benefits you choose. For just covering the building structure with a sum insured of about ₹40 lakh, the yearly premium can be between ₹2,000 and ₹4,000. If you only want to insure your home contents, like furniture and electronics, it usually costs between ₹1,000 and ₹2,000 a year. For full coverage that includes both the building and contents, with a sum insured of ₹40 lakh for the building and ₹5 lakh for the contents, the premium can range from ₹3,500 to ₹5,500 per year.

Common coverage areas of home insurance policies

Home insurance policies in India usually cover several important areas to protect your home and belongings. They include coverage for the building structure, like walls and the roof, against risks such as fire or earthquakes. 

They also protect the contents of your home, like furniture and electronics, from theft and damage. Personal liability coverage helps with legal costs if someone gets hurt on your property and you are found responsible. If your home becomes uninhabitable due to a covered event, the policy can help with the cost of temporary housing. 

Additionally, it covers losses from burglary and damage from natural disasters like floods and cyclones. You can also add extra coverage for specific items, such as valuable jewellery or artwork, if needed.

Common exclusions of home insurance policies

Home insurance policies in India have some common exclusions. They do not cover damage that is intentionally caused by you or anyone else. Properties made from temporary materials like mud or bamboo are generally not covered. Damage that existed before you took out the policy is not included either. Issues caused by manufacturing defects in items like electrical or mechanical devices are also excluded. 

Normal wear and tear, as well as damage from war or nuclear events, are not covered. If your property is left unoccupied for more than a certain period, usually 30 to 45 days, any damage that happens during that time won’t be covered. Lastly, unexplained losses or mysterious disappearances of items are not included.

Pros and cons of home insurance policies

Pros

Home insurance offers several benefits. It provides financial help if your home is damaged by things like natural disasters, theft, or fire. This protection gives you peace of mind, knowing that your home and belongings are covered. Many policies also include liability coverage, which helps if someone gets hurt on your property. If your home becomes uninhabitable because of a covered event, the insurance can help pay for temporary housing. Plus, you can often customise your policy to fit your needs, including extra coverage for valuable items or specific risks.

Cons

Home insurance has some downsides. The cost of premiums can be high, especially if you want a lot of coverage. There are also many exclusions, meaning not all types of damage or loss are covered. You might need to pay a deductible before the insurance starts covering costs, which can be a significant expense. The terms and conditions of policies can be complicated, so you might have to spend time reading and understanding them. Additionally, there’s always a chance your claim could be denied if it doesn’t meet the policy’s requirements.

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