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

Many people confuse home warranty and home insurance but they’re not interchangeable. While they both offer protection, they serve different functions Let’s break down the difference.

What is a home warranty and what does it cover?

A home warranty is a kind of insurance for certain components of your home that can help finance costly repairs. Home warranties provide coverage for the service, repair, and replacement of essential systems, like plumbing and electrical systems, and appliances, usually items that aren’t covered by traditional home insurance (more on this later).

Home warranties can help reduce the out-of-pocket costs of expensive repairs and replacement from normal wear and tear.

With home warranties, you pay a flat fee for service on your plumbing or electrical systems or appliances. Your warranty provider will send an approved service professional to diagnose and repair the issue if it’s covered in your policy. If the item can’t be repaired, it will be replaced with a similar item.

Another benefit of home warranties is the ability to transfer policies to the next owner, unlike insurance. You can even request a seller provide a home warranty as part of your home offer.

What is home insurance and what does it cover?

Home insurance provides protection for a home’s structure and property, the homeowner’s personal property, and provides liability protection for injuries that may happen on your property.

Home insurance covers your home and any unattached structures on your property from hazards like vandalism, theft, and natural disasters such as fire, wind damage, tornadoes, hurricanes, and thunderstorms (check with your individual policy to verify covered events). It may also provide coverage in case your belongings are stolen or destroyed by a covered event, even if it happens away from home.

Your mortgage lender requires you purchase home insurance as a condition of securing financing.

Is a home warranty the same as home insurance?

In short, a home warranty isn’t a replacement for home insurance. Home warranties act as a supplement to your main property coverage, typically covering damages and replacements on items your regular home insurance doesn’t cover. That’s why it’s beneficial to have both.

Do you need a home warranty?

Having a home warranty coverage is never required but can be helpful in case you’re worried about managing the full cost of homeownership. Consider if a warranty makes sense for your situation. If you don’t have the cash reserves to cover the costs of repairs or replacement or purchasing an existing home, a home warranty may be helpful.

Reach out to a home warranty professional to learn more about available options and to create a plan that works for you.

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