Home Insurance vs. Home Warranty

Home warranty and home insurance are terms many people use interchangeably. However, both have very different meanings from one another. A home warranty offers coverage for the repair and replacement of major appliances and systems in the home. Usually warranties last for one year or more and can possibly be renewed afterwards. A typical homeowners insurance policy provides financial protection in the event of an accident or disaster happening to the home.

It’s worth mentioning that home insurance and home warranty are both important tools that play a crucial role in reducing financial burden. However, both tools play very different roles for homeowners.

In this article we will talk about home insurance vs. home warranty and why you need it.

Home Insurance Vs. Home Warranty

A home warranty is not an alternative to homeowners insurance. A home warranty typically covers systems such as plumbing, electrical, and the HVAC. Also, some of your appliances like the washer, dryer, refrigerator, and dishwasher a lot of times have warranties. Some warranties are comprehensive and more robust compared to others.

In contrast, a home insurance policy covers loss and damages that occur due to perils such as vandalism, fire, wind, theft, or hail.  You do have the option to buy a more comprehensive plan that typically costs more and offers more coverage than a basic policy.

The standard homeowners policy doesn’t cover things like spilling paint on the floor. However, if you bought an all-risk policy, you would typically get coverage for an incident like that. What coverage you get is dependent on your comfortability with risk and your willingness to spend more money.

You might not be aware of this, but many home mortgage lenders require you to have homeowners insurance. That’s a major difference between home warranties and home insurance. A home warranty can complement homeowners insurance as it covers damages that aren’t typically covered by homeowners insurance.

A home warranty is a contract of inclusion, which means it only covers items included in the contract. Homeowners insurance is typically seen as a contract of exclusion, meaning it covers a wide variety of things and includes certain exclusions.

When Should You Buy Home Warranty?

If you own a home, you can benefit from buying a home warranty since it’s designed to lower the risk of big-budget expenses. Plus, if your home has an older HVAC system, repairing or replacing it can be expensive. Luckily, if your system is still under warranty this cost would be covered.  Think of a home warranty almost like an extended warranty on a car, car insurance doesn’t cover if your car breaks down but a warranty does.  It is the same concept but with a home.

When Should You Buy Home Insurance?

If you’re a homeowner, buying a home insurance policy is a wise decision. A home is likely your largest asset and needs financial protection from fire, vandalism, theft, etc. You should get homeowners insurance right before closing on a home. Home insurance isn’t meant for typical wear and tear.  Think of home insurance for accidents that are sudden and unexpected.

Summing Up

Both home insurance and home warranty offer different financial coverage for various expenses associated with owning a home. Make sure you carefully read the policy documents to make the most of these contracts.


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