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Home Warranty vs Home Insurance: What You Need to Know

Home Warranty vs Home Insurance

If you are a homeowner or planning to become one, you may be wondering how to protect your home and your belongings from unexpected damages or losses. You may have heard of home warranty and home insurance, but do you know what they are and how they differ? In this article, we will explain the basics of home warranty and home insurance, compare their key features and benefits, and help you decide which one is right for you.

What Is a Home Warranty?

A home warranty is a service contract that covers the repair or replacement of certain appliances and systems in your home, such as the refrigerator, dishwasher, air conditioner, plumbing, and electrical system. A home warranty does not cover the structure of your home or your personal belongings. It only covers the items that are specifically listed in your contract.

A home warranty can help you save money and hassle when something breaks down in your home. Instead of paying for the full cost of repair or replacement, you only pay a service fee (usually between $50 to $150) to the home warranty company, and they will send a qualified technician to fix the problem. If the item cannot be fixed, the home warranty company may replace it with a similar or equivalent model.

A home warranty is optional and can be purchased at any time. However, it is most common to buy a home warranty when you buy a new or pre-owned home. Some sellers may offer a home warranty as an incentive to buyers, or some buyers may request a home warranty as part of the negotiation process. A home warranty typically lasts for one year and can be renewed annually.

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What Is Home Insurance?

Home insurance is a type of property insurance that covers your home and your personal belongings against certain perils, such as fire, windstorm, theft, vandalism, and liability. Home insurance does not cover normal wear and tear, maintenance issues, or mechanical breakdowns of appliances and systems.

Home insurance can help you recover from a major loss or damage to your property or possessions. Depending on your policy, you may receive either the actual cash value or the replacement cost of the covered items. You may also receive additional living expenses if you have to temporarily move out of your home due to a covered loss. Additionally, you may receive liability protection if someone is injured on your property or if you accidentally cause damage to someone else’s property.

Home insurance is usually required by mortgage lenders as a condition of financing your home. Even if you own your home outright, it is still advisable to have home insurance to protect your investment and assets. Home insurance policies are usually valid for one year and can be renewed annually.

Home Warranty vs Home Insurance: Key Differences

The table below summarizes some of the main differences between home warranty and home insurance.

Feature Home Warranty Home Insurance
Coverage Appliances and systems in your home Structure of your home and personal belongings
Cause of loss Mechanical breakdown or failure Perils such as fire, windstorm, theft, etc.
Payment Service fee per claim Deductible per claim
Benefit Repair or replacement of covered items Actual cash value or replacement cost of covered items
Requirement Optional Usually required by mortgage lenders

Why You Should Read the Fine Print on Home Warranty and Home Insurance Policies

Before you buy a home warranty or a home insurance policy, it is important to read the fine print carefully and understand what is included and excluded in your coverage. Both types of policies have limitations, exclusions, and conditions that may affect your claim.

For example, a home warranty may not cover items that are improperly installed, maintained, or modified. It may also have caps on the amount or frequency of claims you can make. A home insurance policy may not cover items that are excluded by your policy, such as flood damage, earthquake damage, mold damage, etc. It may also have sub-limits on certain categories of items, such as jewelry, art, electronics, etc.

To avoid surprises and disputes when you need to file a claim, make sure you read your contract carefully and ask questions if anything is unclear. You should also keep receipts and records of your appliances and systems’ purchase dates, model numbers, serial numbers, warranties, etc., as well as an inventory of your personal belongings with photos and values.

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Who Should Buy a Home Warranty?

A home warranty can be beneficial for homeowners who want to protect their appliances and systems from breakdowns or failures due to normal use. A home warranty can also be useful for homeowners who do not have the time, skills, or budget to handle repairs or replacements on their own.

A home warranty may be especially valuable for homeowners who:

  • Have older appliances or systems that are out of manufacturer’s warranty
  • Have expensive appliances or systems that are costly to repair or replace
  • Have multiple appliances or systems that need frequent servicing
  • Want to avoid the hassle of finding and hiring contractors
  • Want to have peace of mind and convenience

Who Should Buy Home Insurance?

Home insurance is essential for homeowners who want to protect their home and their personal belongings from major losses or damages due to unforeseen events. Home insurance can also provide liability protection for homeowners who may be held responsible for injuries or damages to others.

Home insurance is a must-have for homeowners who:

  • Have a mortgage on their home
  • Have a significant amount of equity in their home
  • Have valuable personal belongings that are difficult or impossible to replace
  • Live in an area that is prone to natural disasters or crime
  • Want to have financial security and legal defense


Home warranty and home insurance are two different types of protection for homeowners. A home warranty covers the repair or replacement of appliances and systems in your home, while home insurance covers the structure of your home and your personal belongings. Both types of policies have their own benefits and limitations, and they complement each other rather than replace each other.

For the greatest peace of mind, consider buying both a home warranty and a home insurance policy. This way, you can have comprehensive coverage for your home and your possessions, as well as save money and hassle in the long run.

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