You can’t pull out a little bit of money in case something goes wrong with your vehicle. You have to have full coverage, and more often than not, that comes in the form of an auto insurance policy. Even if you’re driving a used car, you’re probably still going to end up paying for a warranty, since it is an important part of most used car deals. So, what’s the difference between an insurance policy and a warranty?
Insurance is supposed to act as a backstop if something unexpected goes wrong with your car, your home, or your business. You pay a premium for this coverage, and then, in the event of a loss, the insurance company will pay to fix the damage. As with most insurance products, there are pros and cons to using one.
When I worked in the tire industry years ago, we had a product called tire protection. If someone who has purchased tire protection suffers a flat tire, we will repair or replace the tire for free.
Of course, the customer paid 10% commission when they purchased the tires, so the repair wasn’t free. Indeed, the cost-effectiveness of tyre protection is on average over 90%. In the back room we exchanged greetings while one of us sold toilet paper and tapped the iron tire holder with a key to mimic the sound of the cash register.
Tire protection is just one example of an extended warranty that is often compared to insurance. While both insurance and warranty can help you reduce your costs, they also have important differences.
In a nutshell: Insurance and guarantees generally cover different risks. Warranties are often meant for wear and tear or mechanical failures, while insurance is meant for sudden and unforeseen risks, such as a car accident or a burst pipe in your home.
It is also important to distinguish between a manufacturer’s warranty and an extended warranty. The manufacturer’s warranty covers the repair or replacement of defective or faulty products for a limited period of time. Manufacturer’s warranties are available at no additional cost.
Like insurance, an extended warranty is a separate purchase, but it can cover more parts and protect your car longer than a standard warranty.
What is covered by the insurance?
You can buy insurance for many risks in life, but we will focus on home and car insurance, as many people also buy extended warranties for their home or car.
Motor insurance and household insurance cover both third-party liability and material damage. Legal liability covers injuries to other people or damage to other people’s property. Coverage for property damage is better than with an extended warranty.
With contents insurance, property damage coverage usually includes the following risks:
- Fire and lightning (and smoke)
- Hail and wind
- Unrest and civil unrest
- Theft (and damage due to burglary)
- Falling Objects
- Pipe breaks, spills and accidental water leaks
- Weight of ice or snow
Most home insurance policies cover a wider range of risks to the home itself, but may limit the risks covered to the above list plus some other covered risks. A hazard is simply the cause of damage or the cause of loss.
Home insurance policies also contain a list of exclusions, i.e. causes of damage that are not covered by the policy. Wear and tear is one of those exceptions. This means that your home contents insurance may cover damage to your air conditioner outside your home caused by lightning or a falling branch.
But it doesn’t cover an exploding AC motor. In case of mechanical defects or wear and tear, you can benefit from a house warranty.
Some insurers, such as B. American Family, offer equipment breakdown insurance in addition to contents insurance. However, most insurers do not offer this supplement.
With motor insurance, the coverage for property damage consists of two parts:
- Impact protection : Collision insurance compensates for damage caused by a collision with another vehicle or a stationary object. Comprehensive insurance also covers damage caused by the car falling over.
- Comprehensive coverage: Many insurers and brokers still call it hull insurance, implying that it covers everything else. This description is largely accurate, but auto insurance policies also exclude wear and tear and mechanical breakdowns. However, insurance can cover all kinds of risks, such as flooding, glass damage, fire or theft.
Coverage for property damage to automobiles is optional, but most policyholders choose to purchase such insurance. Lenders usually require comprehensive insurance if you have a car loan or if you lease your own car.
Between these two coverages (collision and third party liability), your car insurance will cover most risks, including
- Car accidents
- Falling Objects
- Wind and hail
In particular, costs such as clutch, brake and tyre wear are eliminated. I recently replaced all 3 of my cars, total cost is almost $3000. Car insurance doesn’t cover normal wear and tear, but an extended warranty can reduce the cost of these and other repairs.
What is covered by the extended warranty?
Extended warranties come in many forms, from the simple tire protection product we offered at the time to much more comprehensive plans that cover important mechanical systems. Like insurance, you can buy warranties for your home or car. Like insurance, an extended warranty can protect you from unexpected costs.
Just as we used to sell tire protection in the tire business, you can now find products or service contracts that target specific risks.
For example, we have no warranty on the house, but we have a service contract with an HVAC contractor and another with a company that inspects termites, because the house is six feet from the woods. The HVAC contract, which we pay monthly, entitles us to free inspections and basic maintenance, as well as discounts on parts and repairs as needed.
Every time a technician comes to service a heater or air conditioner, they include in their estimate a part that may one day fail. It’s a business. We rarely take up his offer, but a well-maintained system is less likely to break down, so we see the value of the whole contract.
Broader warranties for homes often cover the following
- Heating, ventilation and air conditioning (HVAC)
- Ceiling fans
- Water heaters
Some warranties also apply to household appliances, for example. B.
- Ovens and refrigerators
- Washers and dryers
- Built-in microwave ovens
Recently, the freezer section of our refrigerator stopped working. We quickly put all the frozen food in the camping fridges, bought ice and called the repair service.
The handyman stayed with us for 20 minutes and in that time replaced a circuit board that looked like the inside of a Pong video game I took apart as a kid.
Council: Do not leave curious children unsupervised with a screwdriver and hammer.
The total cost of this low-tech piece was $438. We had no guarantee for the house, so we paid full price.
A home warranty can cover unexpected repairs to appliances, reducing (but not always eliminating) the cost of repairs to the user. However, if you need coverage for consumer electronics such as televisions, computers, sound systems or game consoles, you may need a different supplement.
As the cost of insurance coverage can begin to rise, many families are taking a more targeted approach to coverage or service contracts, buying coverage for the most significant potential losses rather than trying to cover all possible risks.
Home warranties cover failures of systems, appliances or electronics in the home. Unlike insurance, the home warranty does not cover theft, fire or cosmetic damage (such as dents). In addition, the broader guarantees on homes often do not include ongoing maintenance costs.
Our HVAC maintenance contract provides for regular maintenance, but it turned out not to be necessary when the freezer broke down. Before you sign a contract, read the details carefully to know what costs you may have to pay out of pocket.
Extended warranties for cars can cover the cost of unexpected repairs, including
- Mechanical defect
- Lack of parts and components
- Damage to the unit or engine
Most extended warranties do not cover maintenance or wear and tear costs such as oil changes or tire rotations. However, covered components and benefits may vary, and each provider typically offers different plans. Some plans act as bumper-to-bumper replacement for the manufacturer’s warranty. Others cover limited repairs, for example to engines and transmissions or to electronics and navigation systems.
In many cases, extended warranties are only available for new cars or low mileage vehicles. Some providers also limit coverage to the most expensive vehicles due to higher average repair costs.
When do you need insurance?
Liability insurance is mandatory in most states, but insurance for property damage to your own vehicle is optional. However, lenders and leasing companies often require comprehensive insurance when you have a car loan or lease your car. Strictly speaking, you don’t need comprehensive insurance for vintage cars or cars you own.
The same goes for your house. You are not required by law to cover property damage to your home. But if you have a mortgage, most lenders require you to have buildings insurance.
Regardless of claims, most home and car owners still prefer to insure their home and car against property damage. According to the Insurance Information Institute, the average auto insurance claim after a collision is about $4,000.
Of course, many applications are above average. The benefits of contents insurance are far greater than those of car insurance. The average cost of a domestic disaster is $13,000, but fire and lightning damage averages nearly $80,000.
For cars, the decision to purchase comprehensive or full comprehensive insurance depends on the value of the vehicle and your ability to pay for the damage yourself if necessary. For newer cars that have not yet suffered a significant loss in value, insurance makes financial sense.
But for older cars, it’s not hard to calculate that it’s better to forgo comprehensive insurance and save the premiums to pay for repairs or replacements out of pocket. For example, suppose you have a $5,000 car.
On average, people get involved in a car accident about every 18 years. According to the National Association of Insurance Commissioners (NAIC), the average cost of collision insurance is about $400 per year.
If you paid $400 a year for 18 years, you would have spent $7,200 on coverage that pays $5,000 (maximum) on your old car – assuming a total loss.
Of course, the cost of insurance coverage can vary depending on the type of vehicle, where you live, your driving record and even your credit rating. Therefore, it is preferable to ask for a quote for property damage coverage rather than relying on average costs to make a decision.
Policygenius helps you find the right insurance coverage and compare rates from the leading auto insurance companies. Moreover, Policygenius is free to use.
For homeowners, the insured losses can be much higher. Losing your car if you don’t have insurance is very painful, but you can recover financially. The loss of your home or major damage to your home is harder to bear. For some families, this may not be possible. Even if your home is paid for, buildings insurance is a wise choice to protect your family.
Policygenius also allows you to choose your rates for contents insurance. Remember to ask for quotes for your home and car. With many insurers, you can save more if you combine home and car insurance.
When do you need an extended warranty?
Necessity may be a strong word when it comes to comprehensive protective measures. However, there are cases where the decision to buy can pay off.
In my case, we have a contract to service heating, ventilation and air conditioning systems. I can fix a lot of things around the house, but fixing furnaces and air conditioners is not my strong suit. In the 70’s my dad would hit the stove with a wrench until it came to life. Plus, we lived in a row house with paper-thin walls, and our house sucked in warm air from nearby houses when the stove was broken. In my current single-family home, that is not possible.
We paid about $15,000 to replace the water heater and air conditioner when we moved in. I support the maintenance plan to protect the investment made.
- Purchase of home insurance: Understanding the 6 different types of cover
- The ultimate guide to lowering your home insurance costs
- How is the contents insurance calculated?
The post What’s the difference between insurance and warranty appeared first on Minority Mindset.
Frequently Asked Questions
What is covered under warranty of car?
The warranty of a car is the period of time during which the manufacturer will repair or replace any defective parts on the vehicle.
Do I need both home warranty and home insurance?
No, you do not need both. Home warranty covers the cost of repairs for a certain period of time, while home insurance covers your home in case of a fire or other natural disaster.
What is the difference between car insurance and warranty?
Car insurance is a contract that protects the driver and their passengers in case of an accident. A warranty is a contract that protects the manufacturer or seller of an item from defects in materials and workmanship.
Feedback,warranty vs insurance cell phonewarranty vs insurance phonewarranty vs insurance carwhat is car warrantygeico home warrantyhome warranty insurance,People also search for,Privacy settings,How Search works,American Home Shield,First American Home War…,Home Security of America, I…,Landmark Home Warranty…,See more,difference between insurance and warranty,warranty vs insurance cell phone,what is the difference between home warranty and home insurance,warranty vs insurance phone,warranty vs insurance car,what is car warranty,geico home warranty,home warranty insurance