Last week, I helped a family in Allen, Texas change their home and car insurance from the carrier they were with to one of the insurance companies we work with. The wife and I were reviewing what the new home insurance policy covered and she asked an excellent question: does the new policy cover the air conditioning unit? Instead of simply answering her question, I wanted to confirm what she meant by the policy covering the air conditioning unit. It turns out, she wanted to know if the home insurance policy will replace their A/C unit when it wears out.
I’ve been asked this question numerous times by both first time home buyers and families who have owned their homes for years. The answer is no and yes. The first part of the answer is: home insurance policies do not cover heating and cooling units, water heaters, appliances, or other items when they wear out or need to be repaired. Insurance companies view these types of situations as maintenance items that are a part of the normal wear and tear of owning a home. When these type of items need to be repaired or replaced the home owner replacing is part of the “joy” of home ownership.
Home insurance policies are designed to cover damage to the home when something happens. To fully answer my new client’s question, I explained the “yes” answer with two examples.
If the air conditioning compressor were to be struck by lightning or damaged by a falling tree, that would be covered by the home insurance policy. The policies I provide cover damage caused by a lightning strike or a falling object. This type of an “event” is not a maintenance or repair related event but rather a covered peril that’s included in what the home insurance policy is designed to protect against. Repairs or replacement of the unit would be covered by the home insurance policy less any applicable deductible.
The second example I provided to illustrate my point was a water heater that leaked because it simply failed or wore out. In this case, the water heater repair or replacement would be considered a maintenance or repair item, but any damage it did to carpet, hardwoods, sheetrock, and even contents would be covered by the home insurance policy.
I went on to explain that a home warranty is designed to cover items that need to be repaired or replaced when they wear out such as an old air conditioning compressor or water heater. If the home owner desires to protect against maintenance related issues heating and cooling equipment or appliances that may fail, a home warranty was perfect for these nuisances. Home warranties cover these items when they break or fail in a way a home insurance policy doesn’t while home insurance protects against the type of events a home warranty doesn’t. It is for this reason I have clients that not only have home insurance, but also home warranties to give them the peace of mind and financial security they desire.
What do you think? Share your comments, questions, and experiences with me in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!