Although home warranties and homeowners insurance have different purposes, they complement each other when it comes to protecting your home. Home warranty plans cover the cost of repairing or replacing home systems and appliances if they fail due to normal wear and tear. Home insurance, on the other hand, covers damage to your home from environmental factors such as fire, theft, and wind, as well as liability if you injure others on your property.
This guide explains the difference between home warranties and home insurance, and explains what most homeowners need for coverage.
Comparison of home warranty and home insurance
Your home is one of your most valuable assets, and protecting it should be one of your top priorities. Both home warranties and home insurance serve this purpose, but home warranties cover the systems and appliances inside your home, while home insurance protects your home from sudden accidents and events.
What is the difference between a home warranty and home insurance?
A home warranty is optional coverage for the failure of home systems and appliances. If your system or appliance breaks down due to normal wear and tear, simply file a claim with your warranty provider and a service technician will be dispatched to get you up and running quickly.
In contrast, home insurance is essential liability coverage for your home, protecting against financial loss due to unexpected events such as fire, theft, and natural disasters. When purchasing a home, purchasing home insurance is often a condition of the loan.
These two types of coverage complement each other. Home insurance protects against catastrophic events, and home warranties help manage the costs of everyday breakdowns.
Contents of home warranty
Home warranties cover all major home systems and appliances, plus some common add-ons if you need additional coverage.
- HVAC (heating and cooling system)
- piping system
- electrical system
- water heater
- Kitchen appliances (refrigerator, oven, microwave, dishwasher, built-in microwave, garbage disposal)
- Washing machine (washer and dryer)
- Add-ons such as pool/spa equipment, well pumps, roof leakage limitations, septic systems, and more.
What Homeowners Insurance Covers
Homeowners insurance protects you from accidental and unexpected life events. It often covers damage to your home from fire, smoke, theft, vandalism, windstorms, hail, lightning, and frozen pipes.
- residenceincluding the structure of the home, attached garage, and built-in amenities.
- personal propertyfurniture, clothes, jewelry etc.
- personal responsibilityincluding legal costs if you are sued for personal injury on your property.
- Payment of medical expenses If a guest is injured on your property
- living expenses If your home becomes uninhabitable due to loss compensation
Home insurance typically does not cover floods, earthquakes, or sewer backups unless you purchase additional insurance. A home warranty also comes in handy, since insurance won’t cover normal wear and tear.
Home warranty and home insurance costs
Home warranties are significantly cheaper than home insurance. You can find basic plans from companies like American Home Shield and Cinch Home Services for as little as $36 per month, but most plans cost between $40 and $100 per month (about $480 to $1,200 per year).
The cost of home insurance varies depending on where you live and your credit score, but most homeowners pay about $2,500 a year, or about $200 a month.
Should I file a home warranty claim or a home insurance claim?
If your HVAC stops working due to age, it is covered under your home warranty. If a storm damages your roof or causes a pipe to burst and flood your home, your home insurance policy will cover you.
Here are some examples of when you might file a home warranty claim instead of a home insurance claim, or vice versa.
Do I need both a home warranty and home insurance?
Home insurance is almost always required if you have a mortgage, but whether you need a home warranty depends on your situation. Home warranties are especially valuable for older home buyers, first-time homeowners, or sellers who include a warranty as part of the transaction.
However, a warranty is not always necessary. Sean Malloy, Founder and Managing Partner of Malloy Law Firm, explains: “Obtaining a home warranty isn’t always worth it, especially for new homes with manufacturer warranties or homeowners who want to build up a rainy day fund and insure repairs themselves.”
After all, home insurance and home warranties serve different purposes. Insurance protects against catastrophic events, and warranties help manage routine breakdowns. Many homeowners choose both for comprehensive coverage, but it’s important to weigh the cost against the age of your home, its condition, and the health of your savings account.
Where to buy a home warranty plan
The USA TODAY team uses an in-house methodology to personally review every home warranty provider on our Top 10 list. Our data shows that providers like American Home Shield and Liberty HomeWarranty are among the best providers of reliable home warranty coverage.
Enter your zip code in the map below to see providers offering home warranty plans in your area.
FAQ
Is a warranty better than insurance?
Warranties are not necessarily better than insurance. The two plans complement each other in that home warranties cover repairs to systems and appliances due to normal wear and tear, while home insurance focuses on environmental damage, accidents, and liability.
What is generally covered under a home warranty?
Home warranties cover major home systems (HVAC, plumbing, electrical systems) and appliances (kitchen appliances, laundry appliances, etc.).
If I have insurance, do I need coverage?
No warranty required. This is optional coverage that can be purchased along with insurance.
