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

From unexpected appliance breakdowns to damages caused by natural disasters, there are plenty of factors to prepare for when you own a home. That’s where home warranties and homeowners insurance come into play. Understanding their key distinctions is essential for protecting your investment and achieving peace of mind.

Here’s a breakdown of the differences between a home warranty and home insurance, so you can make informed decisions for your home’s protection.

What is a home warranty?

A home warranty is a service contract that covers the repair or replacement costs for major home systems and appliances when they break down due to normal wear and tear. Think of it as an optional agreement that helps save you money (and stress) when household items fail unexpectedly. Home warranties can be especially helpful for first-time buyers who want extra protection as they settle into a new home.

What does a home warranty cover? 

Home warranties typically cover items such as:

• Appliances: Refrigerators, ovens, dishwashers, washing machines, and dryers. 
• Systems: Electrical, plumbing, HVAC (heating, ventilation, and air conditioning), and water heaters. 
• Optional add-ons (varies by provider): Pool and spa equipment, septic systems, and roof leaks.

Key benefits of a home warranty

• Financial protection: Avoid steep, out-of-pocket repair costs for aging appliances or systems. 
• Convenient service: Many warranties include access to trusted repair professionals. 
• Peace of mind: Allows you to plan for unexpected breakdowns without it disrupting your budget.

What is home insurance?

Homeowners insurance, also known as home insurance, is a mandatory policy for most mortgage borrowers and is designed to protect your home and personal belongings against unexpected disasters or damages. It also provides liability coverage if someone is injured on your property. 

What does homeowners insurance cover? 

Homeowners insurance usually protects against:

• Structural damage: Repairs or rebuilding costs for your home if it’s damaged by disasters like fire, wind, or hail (specific events are outlined in your policy). 
• Personal belongings: Compensation for stolen, lost, or damaged items inside your home, such as furniture, electronics, and clothing. 
• Liability protection: Legal and medical costs if someone is injured on your property. 

Key benefits of home insurance

• Financial protection: Covers the cost to repair or replace your home and belongings if they’re damaged or stolen.
• Liability coverage: Protects you if someone is injured on your property or if you accidentally damage someone else’s property.
• Peace of mind: Provides security knowing your home and assets are protected from unexpected events like fire, theft, or natural disasters.

Is a home warranty the same as home insurance?

While both are types of policies for homeowners, home warranty and home insurance are not the same thing. Home insurance typically doesn’t cover appliance or system breakdowns caused by normal wear and tear. This is where a home warranty can fill the gap. Home insurance also typically doesn’t cover certain natural disasters like floods or earthquakes. However, separate policies for these can be purchased to provide additional protection. Many homeowners find value in having both a home warranty and home insurance, as they complement each other.

• Homeowners insurance steps in to cover significant disasters like a house fire or a tree falling on your roof. 
• Home warranties come to the rescue when your air conditioner stops working in the middle of summer or your refrigerator suddenly gives out.

Having both ensures you’re protected from a wide range of risks, from unexpected breakdowns to catastrophic events. It’s a proactive approach that can save you money, time, and unnecessary stress.

Key differences between a home warranty and home insurance 

Deciding what’s right for you 

Your decision ultimately depends on your home, its age, and your risk tolerance. Here are some scenarios to consider:

• New homeowners may find comfort in a home warranty, especially if the home’s systems and appliances are no longer under manufacturer warranties. 
• Older or recently renovated homes could benefit from both a comprehensive warranty and insurance policy, given the probability of breakdowns and the need to protect a higher-value property. 
• Budget-conscious buyers or sellers might look to home warranties as a way to smooth out unexpected maintenance costs or sweeten the deal during a sale.

At the end of the day, protecting your home means preparing for both the everyday hiccups and the rare but costly disasters. A home warranty can handle the wear‑and‑tear surprises, while a homeowners insurance policy safeguards you from the major losses that could truly derail your finances. By combining both, you create a safety net that keeps your property, belongings, and peace of mind intact, no matter what comes your way. 

*Zillow Home Loans; an equal housing lender. NMLS #10287