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Home Warranty vs. Home Insurance

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by Danni White ConsumerAffairs Research Team
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Owning a home is a bucket list item for many of us, and it’s important to protect your home after purchasing it. To do this, it helps to understand what kind of coverage it needs: a home warranty, home insurance or both. If you’re confused about which one you need, read on — we’ve got you covered.

What is the difference between a home warranty and home insurance?

Home insurance typically protects your home from incidents such as fires, theft and natural disasters. A home warranty, on the other hand, helps protect you financially by covering home appliances and systems in your home that may break down and need replacement or repair.

Home warranties

A home warranty is a service contract that helps cover the cost of repairing or replacing your system components and appliances that stop working. The systems, components and appliances that are covered in your warranty document typically include your heating, ventilation and air conditioning (HVAC) components, electrical and plumbing systems, kitchen appliances and washer/dryer. You can also cover larger systems, including your pool and spa, though this is usually an additional cost.

Home warranty contracts typically have one-year contract terms and are not required to obtain a mortgage. While it is not something that you need, it is something that could save you money in the long run.

Homeowners insurance

Home insurance policies, as mentioned above, cover any damage to your home caused by incidents such as theft, storms, fires and some natural disasters. The policy typically covers the interior and exterior of your home, personal property in case of theft, loss or damage and general liability that arises when a person is injured while on your property.

A home insurance policy is usually mandatory, and a bank will generally require you to obtain one before issuing a mortgage on your home. It needs to be renewed each year and usually costs anywhere between $300 and $1,000 a year.

Home warranty vs. home insurance coverage

CoverageHome warrantyHome insurance
Plumbing
Electrical wiring
Refrigerators
Stoves
Fires
Floods
Lightning damage
Domestic mechanical and electrical appliances
Assets such as valuables and jewelry
HVAC systems
Washers and dryers
Dishwashers
Central vacuums
Burglary
Personal accident coverage
DVD/VCR
Ceiling fans
Garbage disposals
Pools, spas, bathtubs
Home warranty
Home insurance

Home warranty vs. home insurance FAQ

Do I need homeowners insurance?
You can buy a home without homeowners insurance. However, in cases where your home is mortgaged or you are a home equity loan holder, your lender may require the home to be insured.
Do I need a home warranty?
Home warranties aren’t legally required, but they can benefit homeowners. A home warranty can be useful if you are on a tight budget or fixed income and don’t yet have savings set aside to cover emergency breakdowns.
What is home warranty insurance?
Home warranty insurance covers the cost of replacing specified appliances and home systems. You typically pay a monthly fee to a home warranty company for however long your contract is active. This is often between six months to a year.

When something breaks down, you notify the home warranty company to assess whether the system or appliance is covered under your warranty. If it is covered, a technician comes to your home to repair or replace it. The home warranty company then sends you a bill to pay the deductible.

Bottom line

Home insurance helps homeowners to pay for structural damage and loss of personal property from emergencies like theft or fire, while a home warranty covers the cost to repair or replace a home's systems and appliances when they fail from old age or normal wear and tear.

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Profile picture of Danni White
by Danni White ConsumerAffairs Research Team

As a member of the ConsumerAffairs research team, Danni White is committed to providing valuable resources designed to help consumers make informed purchase decisions. Danni specializes in content strategy and development, with over a decade of professional writing and research experience.