Home Warranty vs. Homeowners Insurance

comparing home warranty vs insurance

When you own a home, there are lots of things that are priorities for you, but one of the most important is making sure that you are prepared for when things go wrong with your home or something in it. 

The way that this happens is by making sure that you are covered as a homeowner with warranties and insurance. Many homeowners have some information on these two topics but not enough to make the best decisions for their coverage. 

Homeowners insurance is purchased to cover things that may occur in your home. A homeowners insurance company will provide general insurance for your home and specified items in it, under the circumstances and terms covered in the policy.

Home warranties are purchased to cover things in your home that will break or fail over time. A home warranty company provides these policies based on items you want to have covered in your home. 

To assist with understanding the coverage and benefits that each provides, here is a list for each.

Homeowner’s Insurance

Homeowners insurance is a policy homeowners purchase to provide coverage for things that might happen in your home. Here are the features of a typical homeowners insurance policy.

  • Homeowners insurance will be required by a mortgage lender. So if you have a loan on your home you will need to purchase a homeowners insurance policy that must be approved by the lender.
  • There will be a deductible that must be paid by the homeowner. The amount of the deductible will vary based on the policy.
  • Homeowners insurance policies will cover accidental damage that occurs from theft or fires and some other natural disasters. However you must check and see which disasters it will cover to make sure you have the coverage you need for your home, and the types of natural disasters likely to occur based on where you live.
  • Homeowners insurance will assist with paying to replace or repair your home or replace or repair personal property.
  • Homeowners insurance also provides liability coverage in the event that someone is injured on your property or in your home.  
  • There will be limits and exclusions in your homeowners policy. You should be clear about what is and is not covered. 

Home Warranty

Home warranties are policies that cover items in your home that will likely break or fail. These include appliances and other items that have a limited life.

Hone warranties are designed to protect homeowners from the cost of expensive repair and replacement of major household appliances and systems. 

  • Home warranties are usually purchased with a new home. 
  • Home warranties provide for repair of the items covered and if repair is impossible the item will be replaced. 
  • There is no limit to the amount of claims a homeowner can make in a year. 
  • The homeowner must pay a service fee each time they request service.
  • All home warranties have limits and exclusions. For example, they will likely not cover cosmetic defects or damage from misuse.

You Should Consider Both Home Insurance and Home Warranties 

Both home insurance and home warranties protect you from having to pay major costs out of pocket when something breaks or a disaster happens, however both have a focus on different things in your home generally.

Homeowners insurance is a requirement if you have a mortgage and even if you don’t you should purchase it for protection.

A home warranty will cover the large systems and appliances in your home. Things like your refrigerator and home heating system can cost a lot of money to repair or replace.

A home warranty will cover these costs and even add to the length of time of any warranty that these appliances and systems may have when you purchase them.