2026-04-24 · personal, home
Home Warranty vs. Home Insurance: What’s the Difference?
Home warranties and home insurance are two completely different products that protect different parts of your home. They are often confused because both involve your house and both require regular payments, but they cover entirely different risks. Understanding the difference helps you avoid paying for coverage you do not need and, more importantly, helps you avoid gaps in protection.
Home insurance (also called homeowners insurance) covers your home’s structure and belongings against damage from covered perils such as fire, storms, and theft. See our homeowners insurance guide for a full overview. A home warranty, on the other hand, is a service contract that covers the repair or replacement of home systems and appliances (HVAC, plumbing, water heater, kitchen appliances) when they break down from normal wear and tear. Most homeowners benefit from having both, especially if their home has older systems and appliances.
Quick Comparison
| Feature | Home Insurance | Home Warranty |
|---|---|---|
| What it covers | Structure and property damage from covered perils | Appliance and system breakdowns from wear and tear |
| Required? | Yes (by mortgage lenders) | No (optional) |
| Typical cost | $1,500-$3,000/year | $300-$600/year |
| Deductible | $500-$2,500 per claim | $75-$125 service call fee |
| Who provides it | Insurance companies | Home warranty companies |
| Example claim | Roof damaged by hail | HVAC system stops working |
What Home Insurance Covers
A standard homeowners insurance policy (HO-3) provides protection across four main areas:
- Dwelling coverage. Pays to repair or rebuild your home’s structure if it is damaged by a covered peril such as fire, wind, hail, or lightning. Understanding the difference between replacement cost and actual cash value is important when selecting your dwelling coverage amount.
- Personal property coverage. Covers your belongings (furniture, electronics, clothing) if they are damaged, destroyed, or stolen.
- Liability protection. Pays for legal costs and damages if someone is injured on your property or if you accidentally cause damage to someone else’s property.
- Additional living expenses. Covers the cost of temporary housing and related expenses if your home becomes uninhabitable after a covered loss.
For full details on what a homeowners policy includes, see our homeowners insurance guide.
Home insurance does not cover normal wear and tear, mechanical breakdowns, or routine maintenance issues. These are some of the most common surprises for homeowners filing a claim. See what homeowners insurance does not cover for the full list of exclusions.
What a Home Warranty Covers
A home warranty is a service contract, not an insurance policy. When a covered system or appliance breaks down from normal use, you file a claim, pay a service call fee, and the warranty company sends a technician to repair or replace the item. Typical coverage includes:
- HVAC systems (heating and cooling)
- Plumbing systems and water heaters
- Electrical systems
- Kitchen appliances (refrigerator, dishwasher, oven)
- Washer and dryer (sometimes included in base plans, sometimes optional)
- Garage door openers
Coverage varies significantly by plan and provider. Some companies offer basic plans that cover only major systems, while premium plans include appliances and optional add-ons like pools and septic systems. Always read the contract carefully before purchasing.
What Neither Product Covers
Even with both a home warranty and home insurance, some situations are not covered by either:
- Pre-existing conditions. Known issues that existed before coverage started are typically excluded by both products.
- Cosmetic damage. Dents, scratches, and cosmetic wear that do not affect functionality are generally not covered.
- Code violations. Neither product pays to bring your home up to current building codes unless the work is part of a covered repair.
- Improper installation or maintenance. If a system or appliance fails because it was installed incorrectly or never maintained, both products may deny the claim.
- Items under manufacturer warranty. If an appliance is still covered by the manufacturer’s warranty, neither a home warranty nor home insurance would apply.
Do You Need Both?
Home insurance is not optional for most homeowners. Mortgage lenders require it, and even homeowners who have paid off their mortgage need it to protect against catastrophic losses like fire or severe storm damage. Going without homeowners insurance means absorbing the entire cost of rebuilding your home yourself.
A home warranty is optional but can save significant money on unexpected repair bills. The decision comes down to the age and condition of your home’s systems and appliances. First-time buyers and owners of homes older than 10 years tend to benefit the most from a home warranty, because aging HVAC systems, water heaters, and appliances are more likely to break down. If your home is newer and your major systems are still covered by manufacturer warranties, a home warranty may not provide enough value to justify the cost.
Cost Comparison
The two products are priced differently and serve different budgets:
- Home insurance typically costs $1,500 to $3,000 per year, depending on your location, home value, coverage limits, and deductible. For a detailed breakdown of what drives your premium, see our homeowners insurance cost guide. To understand specific pricing factors, see what impacts your home insurance rate.
- Home warranty plans typically cost $300 to $600 per year, plus a $75 to $125 service call fee each time you file a claim. Premium plans with broader coverage cost more.
For most homeowners, the combined cost of both products is manageable and provides comprehensive protection against both catastrophic damage and everyday system breakdowns.
Frequently Asked Questions
Does home insurance cover appliance breakdowns?
No. Home insurance covers damage from covered perils like fire, storms, and theft. It does not cover mechanical breakdowns or normal wear and tear. If your refrigerator stops working because the compressor fails from age, home insurance will not pay for the repair. That is what a home warranty covers.
Is a home warranty required?
No. Unlike home insurance, which mortgage lenders require, a home warranty is entirely optional. No lender or government entity requires you to have one. It is a personal financial decision based on the age and condition of your home’s systems and appliances.
Can I file a home warranty claim and a home insurance claim for the same issue?
Sometimes. The two products can apply to different aspects of the same event. For example, if a storm causes a power surge that damages your HVAC system, your home insurance may cover the storm damage to your home while your home warranty might cover the HVAC repair. The key is that each product addresses its own type of loss.
Should first-time homebuyers get a home warranty?
It is worth considering, especially if the home has older appliances and systems that may be nearing the end of their useful life. Sellers sometimes include a home warranty as part of the sale to provide buyers with extra peace of mind. See our guide on the cheapest home insurance for first-time buyers for more tips on protecting your first home without overspending.
Practical Next Steps
Review your current homeowners insurance policy to understand what it covers and what it excludes. If your major systems, including your HVAC, plumbing, and water heater, are more than 10 years old, get quotes from two or three home warranty companies and compare what each plan covers. Coverage varies significantly between providers, so read the fine print on exclusions and service call fees before you commit.
Sources
- Insurance Information Institute (III)
- National Association of Insurance Commissioners (NAIC)
- Consumer Financial Protection Bureau (CFPB)