Key takeaways:
- Home insurance covers damage to your house and personal belongings due to unexpected events.
- A home warranty covers repairs and replacement of appliances and systems due to normal wear and tear.
- Having both home insurance and a home warranty is strongly recommended, but only home insurance is required.
Many assume they are the same thing, but a home warranty and home insurance have a few important differences. Whether you’re browsing Redfin to buy a home in Cincinnati, OH, fixing up a rental house in Nashville, TN, or doing some research before moving out of your Seattle, WA apartment, getting familiar with these terms will help you ensure your home is fully covered.
Home warranty vs. home insurance: a quick comparison
| Feature | Home insurance | Home warranty |
| Required? | Yes (by lenders) | No (optional) |
| Covers | Home structure, additional structures (sheds, fences, etc.), personal belongings, and liability | Appliances and home systems (HVAC, plumbing, etc.) |
| Cause of damage | Unexpected events (storms, fires, break-ins, etc.) | Normal wear and tear |
| Cost | Average $1,411 per year | Average $350-$600 per year |
What is a home warranty?
A home warranty provides coverage for your home’s systems and appliances. Think washing machines, water heaters, and electrical systems. These items go through normal wear and tear, and a home warranty helps you pay for repairs or replacements when they are needed.
A home warranty is not required, but it is recommended. The cost of the warranty varies depending on the company you select, but you can purchase a home warranty at any time.
Who should buy it
- Homeowners with out-of-warranty or outdated systems and appliances
- Buyers who may struggle to cover sudden repair costs out of pocket
- People who don’t know a trusted professional for repairs
>> Read: How Much Does a Home Warranty Cost? A Guide on Average Prices, Coverage, and Tips
What is home insurance?
Home insurance covers the home itself, as well as other structures like a workshop or shed that may not be permanently attached. If your house or your belongings are damaged due to unexpected events, like natural disasters, home insurance will pay for those repairs or replacements.
Home insurance is required when taking out a mortgage, and a lender won’t approve the loan without it.
Who should buy it
- Anyone taking out a home loan
- Property owners looking to protect their home and personal items from damage or loss
- People who want liability coverage in the case of injury on their property
What is covered under home warranty vs. home insurance?
A big difference between a home warranty and home insurance is the types of damage they cover. While a warranty covers wear and tear on appliances and systems inside the house, home insurance covers structural damage and loss of personal belongings due to unexpected events like fires and storms.
Brian A. Payne, president and CEO of Field Insurance Agency, explains the key differences between the two types of coverage. “Insurance covers losses that occur after a covered peril damages property or personal belongings. Common covered perils include fire, wind, lightning, and burst pipes. Insurance policies typically do not cover wear and tear or age-related issues with appliances, which is where a home warranty may provide coverage.”
Here’s how these coverages work in real-life scenarios:
- Scenario 1: You open your dishwasher to find that the load of dishes you ran last night is still dirty, and a spray arm has detached from the machine. A home warranty will pay for repairs or a replacement dishwasher.
- Scenario 2: A severe windstorm comes through and a falling tree causes some damage to your roof and crushes your bicycle. Depending on the policy, your home insurance will cover the cost of repairs for the roof, as well as the cost of replacing the damaged bike.
- Scenario 3: Your toilet leaks while you’re on vacation and causes significant water damage. Your home warranty will pay to replace or repair the toilet, but your home insurance covers the repairs to the damage and any lost personal items.
Do I need both?
To protect their investment, lenders require home insurance before approving a mortgage. If you buy a house outright with cash, you can avoid both a mortgage and proof of home insurance upfront, but it’s still wise to have coverage. Rather than skipping it altogether, decide how much home insurance you need and work with your insurance provider to build coverage that’s right for you.
While a home warranty is not a requirement, the cost is generally worth the peace of mind. The average price ranges from $350 to $600 per year, and it could potentially save you thousands if an appliance or system breaks down and needs to be replaced.
It may be tempting to decide between a home warranty vs home insurance, but having both offers the best protection. New homeowners often face unexpected appliance failure in their first year. Adding a home warranty on top of your home insurance helps cover those costs, preventing large repair bills right after moving in.
Home warranty vs. home insurance FAQs
What’s the difference between home warranty vs. home insurance?
A home warranty covers repairs and replacement of appliances and systems due to wear and tear, while home insurance protects your home and belongings from unexpected events like fires, storms, or theft.
Is home insurance required?
Yes, your lender will require proof of home insurance when you sign your closing documents to finalize your mortgage.
Can I buy a home warranty after moving in?
Yes, you can purchase a home warranty at any time, or cancel it at any time. Check with your provider to learn specifics about your policy, and be sure to note any cancellation fees.
Does home insurance cover appliance breakdowns?
No, home insurance does not cover appliance breakdowns, although it may cover damage caused by an appliance breakdown, like a leak from a dishwasher.
Do I really need both a home warranty and home insurance?
If you want the fullest protection, yes, you should get both. Home insurance is essential for disaster protection and recovery while a home warranty saves you money on common home maintenance and repairs.
Can a seller offer home warranty coverage during the sale?
Yes, it’s fairly common for home sellers to include a one-year home warranty in a home sale. This attracts more buyers as it gives them peace of mind during their first year of ownership.
In comparing a home warranty vs. home insurance, both is best
When comparing home warranty vs. home insurance, it’s clear that both serve important, and different, purposes. Home insurance is required to protect against disasters and major losses, while a home warranty helps cover wear and tear on appliances and systems. Together, they offer fuller protection and peace of mind for homeowners. If you’re buying a new home or just want to better protect the one you’re in, consider adding both.