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Homeowners Insurance

Equipment Breakdown Insurance vs. Service Contracts: What’s Best for Your Home?

In theworld of homeownership, protecting your investment goes beyond safeguarding thewalls and roof. The lifeblood of your home lies in the unseen – the appliancesand systems humming quietly in the background, making everyday life possible.But what happens when these critical components break down? Should you rely on equipmentbreakdown insurance or sign a service contract? Understanding thedifferences between the two can help you choose the most cost-efficient way tomaintain the equipment running your home.


Key Differences: Cost, Coverage & Convenience


Equipment breakdown insurance and service contracts both offerhome appliance protection,but each serves different purposes and operates in distinct ways. The biggestdifferences between the two come down to the costs involved, what’s covered bythe service, and how convenient each is for homeowners.


What Is Equipment Breakdown Insurance?


Equipmentbreakdown insurance protects against sudden and accidental mechanical/electricalfailures of essential home systems and appliances. It doesn’t cover damages dueto routine wear and tear. Equipment breakdown insurance is, as the nameimplies, an insurance product you add onto your existing homeowners insurancepolicy, for $50/year with a few of the carrierswe represent.


Equipmentbreakdown insurance is meant to pick up where your homeowners policy leavesoff. For example, if a fire destroys your washer and dryer, or a storm damages youroutside AC compressor, your homeowners policy should cover it – as long as youhave adequate personal property coverage (listed under Coverage C in yourpolicy).


This iswhere equipment breakdown insurance steps in to repair or replace the sameequipment – when the breakdown is due to reasons not typically covered in ahomeowners policy. In this way, the two insurance coverages complement eachother for seamless protection of your home and those essential systems andappliances within.


What’s covered:


·        Mechanical, electrical, or pressure systembreakdown

·        Major appliances: refrigerator, stove,washer & dryer, etc.

·        Personal electronics: including laptopsand smartphones

·        Home systems: AC, home security, electricalpanel, etc.

·        Covered equipment of any age or with any expectedlifetime




·        Preexisting damage

·        Damages caused by normal wear and tear

·        Cosmetic damage

·        When equipment is covered by otherwarranties

·        Misuse or neglect

·        Rust, decay

·        Computer-related glitches

·        Lightning, fire, or water damage

·        Product defect


Equipmentbreakdown coverage covers a wide range of household equipment, including HVAC,water heaters, major appliances, and more. Notably, it also includespersonal electronics – such as laptops, tablets, gaming devices, smartwatches, cellphones – and most residential service contracts don’t.


Thisinsurance is also fairly flexible. It allows homeowners to choose your own serviceprovider, giving you control over who fixes your equipment. This also isdifferent under service contracts, which generally require you to choose fromtheir network of contractors.


What Is a Service Contract?


A residentialservice contract is an agreement a homeowner makes with a repair service,manufacturer, or utility company. Service contract terms will vary from companyto company – so, be sure to check the terms of the service contract you’reinterested in. Generally speaking, service contracts cover the repair orreplacement of home systems and appliances due to wear and tear andother issues. You’ll want to check your service contract’s terms to discoverexactly which risks/hazards your home equipment is protected against.  


Servicecontracts typically require a homeowner to choose from a network of approvedcontractors who will provide the necessary repairs. This limits your choicebut may streamline the process.


Service contractscover many major household appliances – and may also cover home systems, too –or at least offer it as an additional option. What service contracts don’ttypically cover (but equipment breakdown insurance does) are personalelectronics, like your laptop or home gaming system.


Costsare another differentiator between the two. A service contract typically costsyou a monthly or annual fee – some estimates have it averaging about $50/monthor $500/year. Homeowners are also responsible to pay a service call fee,usually somewhere between $75 to $150 per visit.


Exclusionsmay include:


·        Preexisting damage

·        Cosmetic damage

·        When equipment is covered by otherwarranties

·        Misuse or neglect

·        Natural disasters, such as storms,flooding


Real-Life Scenarios: Which One Saves the Day?


Choosingbetween equipment breakdown insurance and a service contract depends on yourspecific needs and preferences. Here are a couple examples of how each may workfor you in certain scenarios.


Scenario1: Air Conditioner Crisis


EquipmentBreakdown Insurance:Your AC unit breaks down due to an electrical surge. With this insurance,you’re covered for the repair costs, minus your deductible. You can choose atrusted local repair service to get it fixed quickly.


ServiceContract:Your AC unit breaks down due to age and normal use. You call your home appliance protection company,which sends an approved technician to fix the issue for a service call fee.However, if the breakdown was due to an electrical surge, you might be out ofluck.


Scenario2: Kitchen Disaster


EquipmentBreakdown Insurance:Your refrigerator stops working suddenly. This insurance covers the cost torepair or replace it, including food spoilage in some cases. You have theflexibility to choose your repair service.


ServiceContract:Your refrigerator fails after years of use. The warranty company sends atechnician to diagnose and repair it, and you pay the service call fee. If thefridge can't be repaired, they might replace it, but you might have to accept amodel they choose.


Cost Comparison: Where’s the Best Value?


Equipmentbreakdown insurance costs you an approximate annual premium ($50/year), plus adeductible ($500) for each claim made. If you make no claims in a year, thetotal cost is just $50. It also offers comprehensive home appliance protection and the flexibilityto choose your own repair person or company. The coverage limit is $100,000.


Servicecontracts cost you either a monthly or annual fee ($50/month or $500/year),plus a service call fee ($75 - $150/visit) each time a technician isdispatched. You get more limited coverage options with a service contract, butit covers something equipment breakdown insurance doesn’t: damage due toroutine wear and tear. The coverage limit will vary, based on the companyyou’re contracted with – but the caps tends to be somewhere between $1,000 and$5,000 or so.


The Result? Consider Your Needs


Equipmentbreakdown insurance is ideal for homeowners who want broad coverage andflexibility in choosing repair services. It’s particularly beneficial if youhave high-value appliances or systems prone to electrical or mechanical issues.


Servicecontracts, on the other hand, may be suitable for those who don’t mind using anetwork of approved providers and are primarily concerned with covering everydaywear and tear without worrying about other causes of damage or loss.


Get Help Finding the Best HomeAppliance Protection


For comprehensive, flexible home appliance protectioncovering a wide range of issues, contact the insurance professionals at The Windward Insurance Agency and ask us about equipmentbreakdown insurance. Call us at (866) 231-2433 for friendly,one-on-one assistance. We can help you keep your home running smoothly, nomatter what life throws your way.