What are Home Insurance and Home Warranty and how do they differ?

A simple difference between a warranty and insurance is that a warranty covers expected events, while insurance covers unexpected events. Thus, a home warranty and insurance are quite different. 

A home warranty is a service contract that covers the malfunction and breakdown of the home’s internal systems and appliances. The homeowner uses the warranty to get installations and items fixed or replaced when they stop functioning.

Home insurance, on the other hand, offers protection to the homeowner against damage to the house. Such damage could result from flood, fire, burglary, etc., and resulting injuries. Home insurance should not be confused with home loan insurance. Home loan insurance cost covers the risk of home loan repayment default. 

Difference between Home Warranty and Home Insurance

You can best compare home warranty vs insurance by looking at their features.

• Coverage
  
  Home warranty coverage extends to repairing and replacing essential systems and appliances in the house that are expensive to repair. You can claim the warranty for malfunction, breakdown and normal wear and tear. Examples of appliances include AC, refrigerators, kitchen appliances, geysers, dishwashers etc. Besides, repairs and replacement of electrical wiring and plumbing, with the attention required for paint, floor finish, plaster etc. also covered.
  
  Features of home insurance include comprehensive coverage, depending on the type you choose. The difference between homeowners insurance and a home warranty is that in the former, you can choose from,
  
  
  • Burglary and theft insurance
  • Liability insurance that covers legal issues and damages caused by and/or in your insured house
  • Home structure insurance protects permanent installations in the ceiling, bathroom, kitchen, and structures like pool, garage, patio, etc. 
  • Fire and peril policy covers natural calamities, humanmade disasters, loss or damage due to government restructuring, pipe/tank explosion, destruction due to landslides etc.

• Cost
  
  Home warranty features include a higher claim likelihood, so it is costly. For your reference, a leading Indian home warranty provider is offering coverage of Rs 2 lakhs for up to 10 appliances at Rs 36,000 per annum.
  
  Home insurance policies from leading insurers, including the ones curated by IDFC FIRST Bank, charge a premium ranging from Rs 3,000 to Rs 4,000 for a Rs 1 crore coverage. 
• Nature of service
  
  A home warranty is in the category of a service agreement. It is more similar to an annual maintenance contract (AMC) rather than insurance. A similar example is the AMC done for the lifts in your apartment. What is home insurance can be best answered by referring to it as a quintessential insurance contract. 

To Sum up

While both house insurance and warranty are important to protect your house and its interiors, a home loan is an ideal way of buying one. With up to Rs 5 crores as a home loan for up to 30 years, IDFC FIRST Bank home loans protect your finance and your peace of mind in the long run.

Disclaimer

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