Home Warranty vs. Home Insurance: Key Differences

When you buy a home, the seller or lender might offer you a home warranty, and it’s important to understand the differences between home warranties and home insurance. A home warranty covers appliances and systems, while homeowners insurance covers your home’s structure and your personal belongings and protects you against liability claims.

Here’s a closer look at the main differences between a home warranty plan and a homeowners insurance policy.

Home warranty vs. home insurance

Though a home warranty and home insurance might sound similar, they serve distinct purposes and offer different types of protection.

Learn more about their differences in the table below.

What a home warranty covers

Think of a home warranty as a service contract for your home. Much like a warranty for an electronic device, a home warranty covers the cost to repair or replace systems and appliances that break down over time due to normal wear and tear.

While exact coverages vary from contract to contract, they usually cover your HVAC, electrical, and plumbing systems as well as appliances like your dishwasher, refrigerator, oven, washing machine, and dryer.1

Home warranty cost

Home warranties typically cost $30 to $100 per month, and you’ll also pay a service fee for each visit. Your costs will depend on several factors, including the company you purchase a warranty from, the coverage level you select, and your location.

Pros and cons of a home warranty

What home insurance covers

Home insurance is like a safety shield for your home. It provides financial protection against unforeseen events, like fires, storms, theft, and even liability for accidents occurring on your property. It’s not about the aging of your home or its contents but about protecting your finances from sudden, catastrophic events.

While coverage can vary from policy to policy, most home insurance policies include:2

Home insurance cost

The average cost of home insurance is $2,532 per year, or $211 per month, for a policy with $300,000 in dwelling coverage, Insurify data shows. You could pay more or less than the average depending on many factors, including your ZIP code, your home’s square footage, the age of your home, and the coverage levels you choose.

Who should get a home warranty?

A home warranty is particularly beneficial if you’re uncomfortable attempting DIY repairs or lack a network of reliable service professionals. New homeowners are often unfamiliar with the maintenance needs of a home and can find value in the safety net a home warranty provides.

A home warranty can also appeal to people purchasing older homes, where appliances and systems might be nearing the end of their lifespan. Home sellers may also invest in a home warranty to make their property more attractive to buyers.

But if your home is new and your appliances are under a manufacturer’s warranty, purchasing a separate home warranty likely doesn’t make sense.

Read the fine print on your warranty

Before buying a home warranty, it’s important to read the fine print.

Home warranties have specific terms outlining what is and isn’t covered. For example, some policies may cover one refrigerator but not a second refrigerator that you might keep in your garage or basement, unless you specifically add it.3 Knowing these details up front helps you avoid unexpected coverage denials later.

Home warranties can also have exclusions for pre-existing conditions, improper installation, or unusual wear and tear. Understanding these exclusions ensures you know when and how your service contract applies.

Who should get home insurance?

Home insurance is essential for every homeowner, regardless of their financial circumstances. While wealthy homeowners could self-insure, the cost of repairing or rebuilding after a catastrophic event like a fire or hurricane can be astronomical. Home insurance provides an affordable safety net against such substantial financial losses.

In addition, one of the most beneficial aspects of home insurance is liability protection. If someone is injured on your property or you, a family member, or a pet causes harm to others or their property, you could face substantial legal and medical bills. The liability coverage your home insurance company provides can protect you from such claims.

Finally, if you have a mortgage, the lender usually requires home insurance. It protects the lender’s interest in your property as much as it does yours.

Home warranty vs. home insurance FAQs