When it comes to protecting your home, both a home warranty and homeowners insurance offer valuable coverage—but they serve very different purposes. Understanding what each covers can help you make informed decisions about safeguarding your investment and your peace of mind.
What Is a Home Warranty?
A home warranty is a service contract that helps cover the cost of repairing or replacing major home systems and appliances that break down due to normal wear and tear. Think of it as a plan for when your air conditioner, plumbing, or refrigerator stops working—not because of an accident, but simply because it’s gotten old or worn out.
Covered items typically include:
· HVAC systems
· Electrical systems
· Plumbing
· Major kitchen appliances (e.g., dishwasher, oven, refrigerator)
A home warranty does not cover structural damage to your home or personal belongings. It also won’t pay for repairs needed due to fire, storms, or theft.
What Is Homeowners Insurance?
Homeowners insurance, on the other hand, is designed to protect your home and personal property against unexpected and often catastrophic events—known as “perils.” These can include fire, windstorms, hail, theft, vandalism, and certain types of water damage.
Typical coverage includes:
· The structure of your home (dwelling coverage)
· Personal belongings (furniture, electronics, clothing)
· Liability protection if someone is injured on your property
· Additional living expenses if your home becomes uninhabitable due to a covered event
Homeowners insurance does not cover normal wear and tear or breakdowns of systems and appliances due to age or use.
Key Differences at a Glance
|
Feature |
Home Warranty |
Homeowners Insurance |
|
Purpose |
Covers breakdowns from normal wear and tear |
Covers damage from unexpected events (fire, theft) |
|
What’s Covered |
Home systems, appliances |
Structure, belongings, liability, loss of use |
|
Required? |
Optional |
Usually required by mortgage lenders |
|
Claims Examples |
Broken HVAC, leaky dishwasher |
Fire damage, storm damage, burglary |
|
Exclusions |
Structural damage, perils, theft, weather disasters |
Wear and tear, appliance breakdowns |
Do You Need Both?
While homeowners insurance is almost always required by mortgage lenders, a home warranty is optional. However, having both can provide comprehensive protection: insurance for major disasters and a warranty for everyday breakdowns.
Which Protects What?
· Home Warranty: Protects your budget from the cost of repairing or replacing home systems and appliances that fail due to regular use.
· Homeowners Insurance: Protects your home, belongings, and finances from major, unexpected disasters and liability claims.
In summary:
A home warranty and homeowners insurance complement each other. Homeowners insurance shields you from the high costs of disasters and theft, while a home warranty helps with the inevitable breakdowns of your home’s essential systems and appliances. For true peace of mind, consider how both types of coverage fit into your home protection plan.
