What Is The Difference Between Home Warranty & Home Insurance?

You may be wondering what the difference is between a home warranty and home insurance if you own or intend to buy a property.

Both the terms “warranty” and “insurance” refer to some type of protection for those who acquire them.

However, these two phrases mean quite different things when it comes to home security. For a variety of reasons, every homeowner should be aware of the distinctions between house warranties and home insurance.

After all, both protect your investment—and your wallet—in the event that something goes wrong.

On the other hand, House warranties and home insurance plans provide different forms of protection. Knowing what each one covers might assist you in determining if you require both.

What is the difference between Home Warranty and Home Insurance?
What is the difference between Home Warranty and Home Insurance?

What Is a Home Warranty?

A home warranty is a service contract that helps cover the costs of repairs and replacements for eligible household equipment and systems.

You get a fixed cost on service calls in exchange for a monthly or yearly charge. If a covered appliance or system fails, your home warranty provider dispatches a specialist to diagnose and repair the problem, and you just pay the service call charge.

These plans, of course, have coverage limitations: A contract covers each qualified appliance up to a certain amount per year, with an annual claim limit.

If you have a house warranty as part of a real estate transaction, the coverage normally begins the day you close.

Home Warranty Overview: Price, Coverage, Time Period, etc.

Read: What Are Home Warranty Upfront Charges?

Read: How To Buy A Home Warranty?

What Does Home Warranty Cover?

What Does Home Warranty Cover

Home warranties cover both new and pre-owned products and systems.

Most home warranty businesses offer three sorts of plans: appliance plans for washers, dishwashers, and refrigerators; system plans for plumbing and electrical systems; and combination plans that cover all of the above.

Most providers let you add coverage for particular items that are not in the standard policies (for an additional charge).

Pools, spas, septic systems, wells, grass sprinkler systems, and extra appliances are common “add-ons” (e.g., a second dishwasher or air conditioner).

Other aspects of the home are also in a home warranty, but each plan is unique.

The main distinction between warranty and insurance is that insurance covers unforeseeable occurrences that result in damage.

In contrast, warranties cover events that are pretty predictable, such as the aging and eventual malfunction of equipment and systems.

While individual appliances may have coverage by manufacturer warranties at first, these only endure for a limited time. Home warranties cover you regardless of how old your equipment or system is.

What Home Warranty Does Not Cover?

Home Warranties cover damages that occur due to the daily wear and tear of appliances.

Any damage related to improper installation, mishandling, or carelessness on your part is not covered.

Also, some companies may or may not cover pre-existing conditions. Before signing up with any home warranty company, make sure you take your time to read the service agreement and be aware of any limitations or exclusions.

What Is Home Insurance?

What Is Home Insurance

Home insurance (sometimes known as homeowners insurance) is a form of property insurance that covers losses and damages resulting from insured dangers.

According to the Insurance Information Institute, A standard home insurance policy provides four categories of coverage.

Coverage for the Home structure

If your residence is damaged or destroyed by a covered risk, this pays to restore or rebuild it.

Other structures on the property, like garages, tool sheds, decks, and gazebos, are usually covered by most policies.

Coverage for Personal belongings

You are protected if your furniture, clothes, sports equipment, and other personal things are stolen or damaged due to a covered risk.

If you have valuable stuff, you may need a floater or personal property endorsement to guarantee that you’re adequately covered.

Liability protection

Liability insurance protects policyholders, their family members, and their pets from claims for injuries and property damage they cause to others.

Additional expenses

If your home is rendered uninhabitable due to a covered risk, this coverage pays for motels, food, and other living expenses.

Read: Who Pays For Home Warranty: Buyer Or Seller?

What Does Home Insurance Cover?

Home Insurance Cover

The HO-3 policy protects your house, goods, and liabilities and is the most common home insurance coverage.

HO-3 plans, according to the III, offer wide coverage and protect against 16 catastrophes and risks.

Personal responsibility for injuries to other persons and their property while on your property is also within homeowners insurance.

Among the most prevalent liability claims are dog bites, house accidents, fallen trees, inebriated visitors, and wounded domestic employees.

Floods and earthquakes do not have coverage by standard homeowner’s insurance plans.

Adding flood or earthquake coverage to your policy, or purchasing new insurance, maybe a sensible option depending on where you reside. Enquire with your insurance agent about if either a suggestion in your region.

What Homeowners Insurance Does Not Cover?

Do not commit the mistake of assuming that a homeowner’s insurance has you covered in any situation.

Unfortunately, natural occurrences such as earthquake and floods are often not covered by homeowners insurance and have separate policies.

Also, homeowners insurance is restricted by coverage caps. Meaning your insurance company would only pay the amount that has been specified in your coverage agreement.

Anything beyond that is your responsibility to bear.

Do Homeowners Require Both Home Insurance & Home Warranty Coverage?

Most lenders require home insurance as a mortgage for issuing a loan to you. This is because insurance reduces the risk of default on the loans.

Having home insurance can also be your savior if your house is damaged or destroyed.

On the contrary, a home warranty is not required by the law, and it is up to you whether you want to have it or not. The good thing about a home warranty is that it is transferable.

So if you are selling your house, then you can transfer the home warranty to the next owner, which helps you bring an extra incentive while selling your house.

Who Should Purchase a Home Warranty?

Who Should Purchase a Home Warranty

Check out these pointers that will help you in deciding whether buying a home warranty is right for you or not:

Best for:

  • Those who do not want unexpected big expenses.
  • Those who do not have the time to find a service technician.
  • People who own HVAC systems or old appliances.

Not for:

  • People who prefer only their trusted service professionals.
  • People who have new or almost new appliances that are still under the manufacturer’s warranty.
  • People who do not like restrictions.

Who Should Purchase a Home Insurance?

Who Should Purchase a Home Insurance

Check out these pointers that will help you in deciding whether buying a home insurance is right for you or not:

Best for:

  • Those who require financial security.
  • People who are taking a loan on their home purchase.
  • People who want to safeguard their house against unexpected events.

Not for:

  • People who only require safeguarding against daily wear and tear.
  • People who can’t afford additional expenses.

The Verdict

When a major household system or equipment fails, home warranties can help cover the costs.

On the contrary, home insurance protects your house and valuables against theft and other risks and provides personal liability coverage.

House insurance coverage may be necessary by your lender if you have a mortgage. Of course, even if it isn’t needed, protecting your investment with solid insurance coverage makes financial sense.

While house warranties are an optional supplementary layer of protection, they may bring further peace of mind.

They may be the best option if your appliances and systems have outlived their standard warranties, and are in danger of breaking down, or are excessively expensive to replace.

Read the fine print before purchasing a home warranty or house insurance policy so you know what it will cover.

If it doesn’t meet your demands or your budget, look for another coverage. That way, if something goes wrong, you won’t be surprised.


How do you know whether you need a home warranty or home insurance?

This depends on your needs and which one is necessary for you, but in the majority of the cases, both of these are necessary to have since they cover different things in your house or for your house.

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

Home warranty focuses on the appliances within your household, and home insurance focuses on the structure of the house as a whole and does not care about the appliances inside it.

If something happens to the structure of your house, you have to have home insurance to get it fixed.

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