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Home warranty vs. homeowners insurance

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There are two main coverage types available to help protect your home and its contents — a home warranty and homeowners insurance. You could purchase both without overlapping coverage between the two. However, it is important to understand how each one works so that you have the protection needed should anything arise with your home.

Is a home warranty the same as home insurance?

A home warranty is different from homeowners insurance. Homeowners insurance is — as its name suggests — an insurance product. You buy it to protect against life’s what-ifs or what your policy calls covered perils. If a fire burns your house to the ground or a thief makes off with the belongings you keep in your home, your insurer covers the cost (minus your deductible and up to your policy limits) to rebuild, repair or replace, whatever the case may be.

A home warranty, on the other hand, is essentially a service contract. It can cover repairs or replacements for a number of major appliances in your home, from your water heater to your refrigerator.

Both products help cover costs for you as a homeowner. Home insurance steps in after covered perils like natural disasters and theft, while home warranties cover repairs or replacement when a major appliance or system breaks.

What does a home warranty cover?

A home warranty typically covers home systems such as electrical or plumbing and major household appliances. “You can purchase [a home warranty] to limit the potential cost of repairing or replacing major home systems and appliances that break down due to normal wear-and-tear,” Adams says. “The protections depend on your provider and the plan you choose. In some cases, you can customize a home warranty to include specific items, such as a wine cooler, spa or pool.”

Some of the more common systems and appliances covered by a home warranty include:

  • Refrigerators
  • Ovens
  • Stoves
  • Water heaters
  • HVAC systems
  • Washers and dryers

If something under warranty breaks due to normal wear-and-tear, you call your home warranty company. They send a technician out (you will usually pay a service fee for this visit). The technician appraises the issue and, assuming they determine it is within the scope of your home warranty, they start the process of getting it repaired for you. You will pay the service fee for the technician’s visit(s), but everything else should be covered.

In short, a home warranty is something you can choose to purchase to protect yourself against expensive appliance or system repairs.

What does home insurance cover?

One of the biggest pieces of the home warranty vs. home insurance conversation is when these products kick in to help pick up the tab for you. Home warranties step in when something breaks during the course of normal use. Homeowners insurance covers you financially against losses or damages due to covered perils. Generally, a homeowners insurance policy will protect you against perils such as:

  • Fires
  • Windstorms
  • Riots
  • Lightning
  • Hail
  • Damage from aircrafts or vehicles
  • Theft
  • Vandalism

Homeowners insurance is more comprehensive. It usually covers:

  • The house itself
  • Any other structures on your property (like a detached garage)
  • Your personal property (like your clothes, furniture and electronics)
  • Your additional expenses if you get displaced from your house by a covered cause
  • Your personal liability

Personal liability coverage helps with legal fees in certain cases. If someone sues you after getting hurt on your property, the personal liability coverage in your homeowners insurance steps in, for example.

While a home warranty is optional, you likely need to have home insurance coverage. As Adams explains, “Homeowners insurance is required by mortgage lenders to protect your property against covered events, such as damage from a natural disaster or vandalism.”

To protect their investment in your house (via your mortgage), your lender will probably require you to keep a homeowners insurance policy in place.

Do you need a home warranty?

Adams puts it succinctly, saying, “A home warranty is never required.” It is something you can choose if you are worried about the costs associated with homeownership. A home warranty can be worth it to give you peace of mind knowing that if something big breaks, you will have help fixing it.

If you are worried about repair costs and do not have much money in your savings account, it might be worth considering. “You are likely a good candidate for a home warranty if you do not have ample savings to pay for unexpected and expensive home repairs,” Adams says.

That said, a home warranty usually costs at least a few hundred dollars a year and averages nearly $1,000 annually — and you will still need to pay the $50-$100 service fee for each visit. If you save money instead of buying a warranty, you can build a nice little savings account to cover repairs through the years.

The account will not expire like a warranty does. “The downside of a home warranty is that it lasts for a limited time,” Adams says. “If you have not needed repairs during the warranty period, you do not get the cost refunded.”

Where can you get a home warranty?

To explore your home warranty options, start by asking friends and family for referrals. First-hand experiences could give you a good idea of what to expect from a home warranty company. If you are a new homeowner, your realtor may be able to recommend a company. Lastly, check with neighbors for home warranty suggestions. They may be able to recommend a company they are happy with.

Before you shop around using the suggestions and referrals you collected, make a list of appliances and systems you want to protect. If you have a specialty appliance or system — like a pool or wine cooler — jot it down to ensure your home warranty will cover it.

Get quotes from at least a few home warranty companies with good customer reviews. Pick the warranty that protects the most appliances/systems against the most causes of breakdown for the least money. Do not forget to factor service fees in as part of the equation.

Frequently asked questions

Can I have both a home warranty and home insurance?

Home warranties and homeowners insurance cover different aspects of your home, making them complementary if you wish to purchase both. Having both can help you rest easy, especially if you are a new homeowner worried about navigating the costs of homeownership.

Is homeowners insurance worth it?

While it may seem like a pricey purchase, having a homeowners insurance policy in place can help you maintain your quality of life through a number of different disasters. Plus, your home insurance policy protects all of your covered personal property — from your clothes to your electronics — and can even help if you find yourself facing a personal liability lawsuit.

What is homeowners warranty insurance?

Using the term homeowners warranty insurance can confuse two different types of home coverage. Homeowners insurance is different from home warranty coverage. The former is an insurance product, while home warranties are service contracts.

Written by
Cynthia Paez Bowman
Personal Finance Contributor
Cynthia Paez Bowman is a former personal finance contributor at Bankrate. She is a finance and business journalist who has been featured in Business Jet Traveler, MSN,, and
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