Home Warranty vs. Home Insurance: What’s the Difference?

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Have you invested a lot of money in your home? What if I told you that you need to protect and safeguard these investments against unexpected circumstances and that anything can happen? But if you are looking for a home warranty or home insurance, it will get to a point where this will begin to appear confusing. So, if you are at that point and finding it difficult to tell the difference between the two of them, relax. You are about to find out: home warranty vs. home insurance: what’s the difference? You also get to discover what they cover and what not.

Home Warranty vs. Home Insurance: What's the Difference?

What Is a Home Warranty?

First of all, what is a home warranty? Well, this is an agreement between a third-party warranty company and a homeowner for offering coverage for some things or equipment within the household. Furthermore, a home warranty covers the homeowner’s investment in situations where the item fails or breaks.

So, the warranty company will cover the repair cost. But as a homeowner, you are responsible for the service fee, and this falls within the range of $50 to $150, depending on the agreement in the contract.

What does a Home Warranty Cover?

Home warranty policies mostly cover the mechanical systems and appliances in a home. Therefore, if these equipments or appliances fails or breaks, affecting your daily activities, you can use your home warranty to get coverage. Here are some of the things that a home warranty covers:

  • Refrigerators
  • Dishwashers
  • Ovens
  • Well pumps
  • Pool pumps
  • Septic tanks
  • Plumbing system
  • HVAC
  • Electrical system

In addition to this, if an item receiving coverage breaks or fails because of normal wear and tear, your warranty company will cover it. However, you need to keep a record of maintenance for these systems or equipment to prove that they are not failing due to neglect.

What Does It Not Cover?

Here are some conditions that your home warranty policy will not cover:

  • Pre-existing conditions.
  • Lack of maintenance (damage due to neglect).
  • Parts, systems, and appliances that are not under your warranty.
  • Inappropriate installations.
  • Unimportant damage.
  • Disasters and accidents.

So, now that you finally understand what a home warranty is, what it covers, and what it does not cover, we are going to home insurance to learn more.

What Is Home Insurance?

Home insurance is a policy that exists between the insurance company and the homeowner. Furthermore, this agreement covers the policyholder’s investments against natural disasters, accidents, and even building failures.

Additionally, home insurance offers general liability insurance, which protects you against injuries to and by other people on your property. It is important to note that any home that is mortgage-paid needs to have home insurance from the bank.

What Does Home Insurance Cover?

Unlike home warranty, home insurance offers a wider coverage option. There are four different coverage options that you can get with a home insurance policy. They include personal property coverage, dwelling coverage, liability insurance, and other structure coverage. These are also the situations your policy can cover:

  • Explosions
  • Smoke
  • Weight of sleet, ice, and snow
  • Fire
  • Riot
  • Lightning
  • Aircraft damages
  • Vandalism
  • Falling objects
  • Theft
  • Hail and windstorm
  • Vehicle damages
  • Freezing of household appliances and systems

And many more. However, note that the coverage options also differ depending on the insurance provider.

What Does It Not Cover?

Every insurance company and policy are not the same. Nevertheless, here are some of the general situations that your homeowner’s insurance quote will not cover:

  • Maintenance issues
  • Earthquake damages
  • Flood damages

But similar to a home warranty, your home insurance will not cover all the repair costs. Instead of paying a service fee, you will pay a deductible.

Is Home Warranty the Same as Home Insurance?

The straight-up answer to the question of whether home warranty and home insurance are the same is NO. They are not a replacement for one another. In other words, home insurance is not a replacement or alternative for home warranty, and vice versa. With a home warranty policy, replacement, servicing, and repair of your home systems and appliances are covered. Some home warranties are stronger than others.

On the other hand, home insurance covers losses and damages from covered events. For instance, theft, hail, vandalism, fire, or wind. What’s more, comprehensive home insurance quotes cover a wide range of situations and have few exclusions. Besides, one of the differences between a home warranty and homeowner’s insurance is that your mortgage lender might need an insurance quote.

Who Needs a Home Warranty?

A home warranty is best for:

  • People who are looking to decrease the risk of big-budget expenses.
  • Old HVAC systems and appliances.
  • People who do not need a service technician.

However, we do not recommend a home warranty if you are trying to avoid the risk of restrictions and exclusions and if you have new appliances with the manufacturer’s warranty.

Who Needs Homeowners Insurance?

Homeowners insurance is best for:

  • People who want to protect their homes.
  • If you are applying for a loan to purchase a house.
  • If you want financial security.

But if you are not able to cover additional expenses or you want coverage from wear and tear, we do not recommend home insurance.

Home Warranty vs. Home Insurance: What Is the Difference?

Although both policies offer similar coverage, they are not entirely the same. In fact, they have a lot of significant variations and dissimilarities:

Home WarrantyHome Insurance
This covers systems and appliances.This covers damages to property.
You can choose it as an optional coverage.Quotes are needed by lenders.
Average service fees: $50 to $150Average deductible: $1,000 to $2,000
General liability insurance is not included.Offer general liability insurance.
Lower limits for every covered itemHigher limits for every coverage type

Now that you have seen the differences between home warranty and home insurance, you will have no problem choosing what coverage you want and where to get it.