Home Warranty vs. Home Insurance: What’s the Difference? When it comes to protecting your home and its contents, the terms “home warranty” and “home insurance” often come up.
While they may seem interchangeable at first glance, they serve entirely different purposes. Understanding their differences can help homeowners make informed decisions about safeguarding their homes and investments.
What is a Home Warranty?
A home warranty is a service contract that covers the repair or replacement of major home systems and appliances that break down due to normal wear and tear. Furthermore, it is designed to provide peace of mind to homeowners by managing the financial burden of unexpected repairs.
What Does a Home Warranty Cover?
Here are the resources that are covered by a home warranty:
- Home Systems: Heating, ventilation, and air conditioning (HVAC), electrical systems, and plumbing.
- Appliances: Refrigerators, ovens, dishwashers, washing machines, and dryers.
- Optional Add-Ons: Coverage for items like pools, spas, and septic systems may also be available at an additional cost.
A home warranty typically does not cover the overall structural components of the house or damages caused by neglect or improper maintenance.
What is Home Insurance?
On the other hand, home insurance, or homeowner’s insurance, is a policy that provides financial protection against damages to your home, and personal property, and liability for injuries or property damage caused to others. It is often required by mortgage lenders.
What Does Home Insurance Cover?
Here are other resources that home insurance covers:
- Personal Property Coverage: These are reimbursements for belongings damaged or stolen in covered incidents
- Dwelling Coverage: Repairs or rebuilds of the physical structure due to covered events such as fire, storms, or vandalism.
- Liability Protection: It covers legal expenses and settlements if someone is injured on your property.
- Additional Living Expenses: This pays for temporary housing if your home becomes uninhabitable due to a covered loss.
Home insurance does not cover wear and tear or the repair of malfunctioning systems and appliances.
Main Differences between Home Warranty and Home Insurance
Home Warranty vs. Home Insurance: What’s the Difference? Listed below are the key noticeable differences between home insurance and a home warranty:
| Feature | Home Warranty | Home Insurance |
| Purpose | Covers repairs/replacements of systems and appliances | Covers property damage, theft, and liability |
| Cause of Damage | Normal wear and tear | Natural disasters, theft, and accidents |
| Coverage Scope | Systems and appliances | Dwelling, belongings, and liability |
| Required by Lenders | No | Yes (usually required for a mortgage) |
| Duration | Typically 1 year with renewable contracts | Annual policy with renewal options |
How Much Does Each Cost?
Let’s have a look at the overall cost of these features:
Cost of a Home Warranty
Home warranty plans vary in price depending on the level of coverage, optional add-ons, and location.
- Basic Plans: $300–$600 annually.
- Comprehensive Plans: $600–$1,000 annually.
- Service Call Fees: $50–$125 per repair visit.
Cost of Home Insurance
The cost of home insurance depends on factors like the home’s location, age, size, and coverage limits.
- Average Annual Premium: $1,200–$1,500.
- Deductibles: Policyholders pay a deductible, usually $500–$2,500, before the insurance company pays out on claims.
Do You Need Both Of Them?
While home warranties and home insurance serve different purposes, they truly do complement each other. Having both ensures comprehensive protection:
Home Insurance: It protects against significant financial losses due to catastrophes, theft, or liability issues.
Home Warranty: It addresses smaller, frequent costs related to system and appliance breakdowns.
If your home systems and appliances are more prone to issues because they are older, a home warranty can save you money and reduce stress. On the other hand, home insurance is essential to protect against unforeseen disasters.
Factors to Consider When Choosing a Home Warranty or Home Insurance
There are still factors that you must consider if you want to choose either a home warranty or home insurance:
For Home Warranty
- Age of Home Systems and Appliances: Older systems are more likely to benefit from a warranty.
- Reputation of the Provider: You must read reviews and research the company’s claim process.
- Service Contract Terms: Also, you must check coverage limits and exclusions.
For Home Insurance
Factors that you must consider when choosing a home insurance include:
- Location Risks: Consider flood zones, earthquakes, and high-crime areas.
- Coverage Limits: Ensure that your home and belongings are adequately insured.
- Additional Riders: You may need riders for other valuable items you’re your jewelries or art pieces.
Top Providers for Home Warranty and Home Insurance
Here are the top providers for both the home warranty and the home insurance:
Top Home Warranty Companies
- American Home Shield: They have wide coverage options and customizable plans.
- Select Home Warranty: They offer free roof leak coverage.
- Cinch Home Services: This insurance provider offers a 180-day workmanship guarantee.
- Choice Home Warranty: The Choice Home Warranty provides affordable pricing and excellent customer service.
- First American Home Warranty: It covers improperly maintained systems.
Top Home Insurance Companies
Here are some top providers that offer home insurance benefits:
- State Farm: State Farm has excellent customer service and nationwide availability.
- Farmers Insurance: This insurance company offers comprehensive coverage options and bundling discounts.
- Nationwide: Nationwide also offers affordable premiums and robust online tools.
- Allstate: Allstate is another provider that offers a variety of discounts and policy customizations.
- Liberty Mutual: This is another insurance company that has competitive rates and additional coverage options.
Frequently Asked Questions
Here are some frequently asked questions you can check out:
Can I purchase a home warranty and home insurance together?
Yes, you can. Many homeowners use both to ensure full coverage for their property and appliances.
Can I switch home warranty or insurance providers?
Yes, you can switch providers. However, you must check your policy for cancellation fees or coverage gaps.
Is a home warranty worth it?
A home warranty can be worthwhile if your systems or appliances are older or if you want peace of mind against unexpected repair costs.
How do deductibles work in home insurance?
You pay the deductible amount before your insurance covers the remaining costs of a claim.