Deciding between a home warranty, homeowners insurance, or both depends on your home’s specific needs and your financial goals. First, assess your home’s age and condition. Older homes or those with aging systems and appliances benefit from home warranties, which cover repairs or replacements for normal wear and tear at a reasonable service fee.

Review the warranty carefully to understand coverage, exclusions like pre-existing conditions, and optional add-ons such as pools or septic systems. Choose reputable warranty providers through trusted sources.

Homeowners insurance, often required by lenders, protects your home against serious events like fires, theft, and natural disasters. Keep in mind, standard policies typically don’t cover floods or earthquakes, so additional coverage may be needed.

According to a CNBC report, homeowners spent up to $6,000 on average on repairs and maintenance in 2022.

What is a Home Warranty?

A home warranty is a service contract designed to cover the repair or replacement of major home systems and appliances that fail due to normal wear and tear. It typically includes essential systems like HVAC, plumbing, and electrical, as well as appliances such as refrigerators, dishwashers, and washers. These contracts are generally annual and renewable, with premiums and service call fees varying by provider.

Homeowners can often customize plans with optional add-ons, such as coverage for pools or septic systems, though exclusions like pre-existing conditions or improper maintenance may apply. The primary purpose of a home warranty is to provide financial protection and peace of mind by addressing unexpected repair costs for homeowners, particularly those with older homes or appliances.

What is Home Insurance?

Homeowners insurance is a policy that provides financial protection against sudden and accidental damages to a home’s structure, personal belongings, and liability risks. It typically covers the dwelling itself, including walls and the roof, as well as personal property like furniture and electronics, against perils such as fire, theft, vandalism, and certain natural disasters. Additionally, it includes liability coverage for injuries or property damage to others and may cover additional living expenses if the home becomes uninhabitable due to a covered event.

Policies are generally annual and renewable, with premiums and deductibles varying based on factors like location and home value. While required by most mortgage lenders, homeowners insurance excludes certain events like floods or earthquakes, which may require separate policies. Its primary purpose is to safeguard homeowners from significant financial losses due to unexpected events.

Key Differences: Home Warranty vs Homeowners Insurance

Aspect	Home Warranty	Homeowners Insurance
Definition	Service contract covering repair/replacement of home systems and appliances due to wear and tear	Policy protecting home structure, personal property, and liability against sudden perils
Coverage	Major systems (e.g., HVAC, plumbing, electrical); appliances (e.g., refrigerator, washer)	Dwelling, personal belongings, liability, additional living expenses
Claim Triggers	Mechanical failure from normal use	Specific perils (e.g., fire, theft, vandalism, certain natural disasters)
Cost Structure	Annual premium: $300–$1,200;Service fees: $75–$125 per claim	Annual premium: $800–$3,000;Deductibles: $500–$2,500 per claim
Duration	Typically 1-year, renewable	Annual, renewable
Requirement	Optional	Often required by mortgage lenders
Exclusions	Pre-existing conditions, improper maintenance, cosmetic issues	Floods, earthquakes, wear and tear
Purpose	Financial protection for repair costs due to wear and tear	Protection against sudden, catastrophic losses and liability risks

When to Choose Each

A home warranty is particularly valuable for homeowners with properties over 10 years old, where major systems like HVAC, plumbing, or electrical, and appliances such as refrigerators, ovens, or washers are more prone to breakdowns due to normal wear and tear. It’s an excellent choice for those with limited emergency savings or who prefer predictable costs, as it covers repairs or replacements for a modest service fee (typically $75–$125 per claim). 

For example, if a 15-year-old air conditioning unit fails in the middle of summer or a dishwasher stops functioning, a home warranty can save homeowners from out-of-pocket expenses that could range from $500 to $5,000. It’s also ideal for first-time homebuyers unfamiliar with maintenance costs or owners of rental properties seeking to minimize repair expenses. Conversely, homeowners insurance is essential for virtually all homeowners, particularly those with mortgages, as lenders mandate coverage to protect their financial stake in the property. It’s critical for safeguarding against sudden, catastrophic events like fires, storms, theft, or vandalism, which could result in tens of thousands of dollars in damages. 

For instance, if a tree falls on your roof during a storm or a break-in results in stolen electronics, homeowners insurance covers repairs and replacements, subject to a deductible. It also provides liability protection, crucial if a guest slips on your driveway and sues for medical costs, or if you accidentally cause property damage to a neighbor. Understanding Home Warranty vs Homeowners Insurance is important because combining both ensures comprehensive protection, addressing routine maintenance of aging systems and appliances while covering major losses from unexpected disasters or legal claims.

Can You Have Both?

Homeowners can and often benefit from having both a home warranty and homeowners insurance, as these products complement each other to provide comprehensive protection for a property. A home warranty covers the repair or replacement of major home systems, such as HVAC, plumbing, and electrical, and appliances like refrigerators, ovens, or washers when they fail due to normal wear and tear, making it ideal for older homes (e.g., over 10 years old) or households with heavy appliance use.

For example, if a 12-year-old water heater fails, a home warranty could cover the $1,000–$3,000 replacement cost for a service fee of $75–$125, significantly reducing out-of-pocket expenses. Conversely, homeowners insurance protects against sudden, catastrophic losses from perils like fire, theft, vandalism, or certain natural disasters, covering repairs to the home’s structure, replacement of personal belongings, and liability for incidents such as a guest’s injury on your property (e.g., a $50,000 roof repair after a storm or a $10,000 liability claim for a slip-and-fall).

Since homeowners insurance excludes wear-and-tear damages and home warranties don’t cover catastrophic events, understanding Home Warranty vs Homeowners Insurance is crucial. Dual coverage ensures protection across a wide range of scenarios. For instance, a homeowner might use their warranty to fix a broken dishwasher while relying on insurance to rebuild after a kitchen fire. This combination is particularly valuable for first-time homeowners, owners of aging properties, or those in areas prone to natural disasters like hurricanes or wildfires.

Home warranty premiums typically range from $300–$1,200 annually, while homeowners insurance premiums range from $800–$3,000, depending on location and coverage, requiring homeowners to weigh costs against their budget and risk exposure (Home Warranty Association of America, 2023). By maintaining both, homeowners gain peace of mind, knowing they’re safeguarded against both routine maintenance costs and major, unexpected losses.

How to Choose the Right Option

Deciding between a home warranty, homeowners insurance, or both depends on your home’s specific needs and your financial goals. First, assess your home’s age and condition. Older homes or those with aging systems and appliances benefit from home warranties, which cover repairs or replacements for normal wear and tear at a reasonable service fee.

Review the warranty carefully to understand coverage, exclusions like pre-existing conditions, and optional add-ons such as pools or septic systems. Choose reputable warranty providers through trusted sources.

Homeowners insurance, often required by lenders, protects your home against serious events like fires, theft, and natural disasters. Keep in mind, standard policies typically don’t cover floods or earthquakes, so additional coverage may be needed.

If possible, combining both options offers comprehensive protection. A warranty covers everyday issues like appliance repairs, while insurance handles significant damages and liabilities.

Compare several providers to find the best coverage, considering customer reviews, transparency, and claims processes. Consult your mortgage lender to ensure your choices meet their requirements, addressing your home’s specific needs and giving you peace of mind.

Conclusion

Home Warranty vs Homeowners Insurance offers distinct protections to safeguard your home. A home warranty covers repairs or replacements of systems like HVAC and appliances such as refrigerators when they fail due to wear and tear, making it ideal for older homes or those with limited repair budgets. Homeowners insurance protects against sudden losses from events like fire or theft, covering the home’s structure, personal belongings, and liability, and is typically required by mortgage lenders.

Combining both ensures comprehensive coverage for routine maintenance and catastrophic losses. Homeowners should evaluate their home’s age, local risks, and budget, exploring providers via resources like the Home Warranty Association of America and consulting lenders to align insurance needs for tailored protection.