- A home warranty covers the costs to repair appliances and systems that break down due to wear and tear.
- Homeowners insurance covers damage to your property’s structure and belongings as well as liability.
- If you have a mortgage on your home, your lender will likely require homeowners insurance.
Home warranties and
each provide coverage that can protect your property — and pocketbook — should something go awry. But they aren’t one and the same.
Do you want to make sure your investment is fully protected? Here’s how home warranties and homeowners insurance can help, and when you might need one or both.
home warranty vs. homeowners insurance: At a glance
Home warranties and homeowners insurance policies are the two main ways to protect your home and its contents. Each can cover the cost of repairing or replacing certain items, fixtures, or elements of your property it they stop working or are damaged.
- Home warranties are service contracts covering the repair and replacement of various home appliances and systems due to breakdown or wear and tear. They typically last for one year at a time and are optional for homeowners.
- Home insurance is a policy that covers damage to your property or its contents due to weather events, theft, vandalism, fire, and other external forces. It also covers liability in many cases and is usually mandatory if you have a mortgage.
“The main difference between a
and home insurance comes down to the types of items covered in the home,” says Steve Wilson, senior underwriting manager at home insurance company Hippo. “Homeowners insurance covers your home’s structural damage and contents from specific types of incidents, while warranties cover your appliances from old age or general wear and tear. Both cover items in your home, have yearly premiums, and cover some — but not all — of your appliances.”
What is a home warranty?
A home warranty — sometimes called home repair insurance — covers the repair and replacement of certain appliances and systems within your home. These typically include things like your HVAC system, refrigerator, washer, dryer, dishwasher, plumbing, and oven.
You might get a home warranty when first purchasing a house. Sellers may offer it as part of your deal. You can also purchase one separately. According to Raj Midha, SVP and general manager of home warranty company American Home Shield, they typically cost between $600 to $800 per year.
“A warranty helps cut the cost to repair or replace many of the systems and appliances in your home and complements your homeowner’s insurance by protecting things that your insurance doesn’t,” Midha says. “Within the first year of homeownership, the most common service requests are for air conditioners, plumbing leaks, water heaters, and refrigerators.”
Home warranties typically last for one year, with the option to renew at the end of your term. You may also be able to add extra protection for features like pools, electronics, and septic pumps.
Home warranty pros and cons
Example of how a home warranty works
Here’s an example of how you might use a home warranty.
Let’s say your dishwasher — a covered system — stops working. you would:
- Call your warranty provider and report that a covered item has broken down or needs repair.
- Pay-a-service fee. With American Home Shield, this varies by plan and ranges from $75 to $125 per call.
- Wait for the warranty company to send out a service technician to address the issue.
You could repeat the process for any covered items until the point your warranty expired.
What is homeowners insurance?
Homeowners insurance covers the structure of your home and its contents if they’re damaged in a storm, fire, act of theft or vandalism, or any other covered event. Standard policies also protect against liability if someone is hurt on your property.
“Homeowners insurance pays for damage and loss caused by outside forces such as fire and weather,” says Angel Conlin, chief insurance officer at Kin. “If any of these events damage or destroy a portion of your home, insurance would help you rebuild and replace your lost and damaged belongings.”
With insurance you’ll have a deductible, which is a certain out-of-pocket threshold you must meet before your insurance kicks in. These vary by policy and insurer and can be a set dollar amount or a percentage of your home’s total insured value. Once you meet your deductible, the insurance company will pay the remaining repair or replacement costs up to your coverage limit.
Unlike a warranty, home insurance won’t cover items that break down due to age or wear and tear.
“If a tree falls and crashes into your kitchen, your homeowner’s policy would help you replace your damaged appliances,” Conlin explains. “However, if your oven range quits working one day due to age, the cost to repair and replace it would not be covered.”
Homeowers insurance pros and cons
Example of how homeowners insurance works
Here’s an example of how you would use your homeowners insurance.
Let’s say a bad storm blows down your fence. You call your insurance company and file a claim (you may be able to do this online or via a mobile app too). They may request photos of the damage or send out an adjuster to assess it in person.
Once they determine the estimated cost of the damage, your insurance company will send you a check for the total repair amount — minus your deductible. You could then can schedule repairs at your convenience.
You might want both
You don’t have to choose one or the other. If you want protection from external events as well as general wear and tear, you might consider buying both a home warranty and a home insurance policy.
As Midha puts it: “The best way to protect your home from the cost of unexpected issues and inevitable repairs is with a combination of a home insurance policy and a home warranty plan.”