Home Warranty vs Home Insurance: A Comprehensive Guide for Homeowners

For homeowners, knowing the difference between a home warranty vs home insurance is important in making financial decisions. Though similar in their intent to protect the homeowner, they differ in their scope and application. 

Home Warranty vs Home Insurance: What’s the Difference?

Feature	Home Warranty	Home Insurance
Coverage Focus	Covers repairs and replacements of home appliances and systems due to wear and tear.	Covers damage and loss due to external events like fires, weather incidents, or vandalism.
Typical Coverage Items	Washers, dryers, HVAC, electrical systems, plumbing, major appliances.	Home structure, personal belongings, liability for injuries, damage caused by natural disasters (with some exceptions).
Purpose	To protect homeowners from costs associated with the aging and malfunctioning of home systems and appliances.	To protect homeowners against financial losses due to damage or destruction of the home and its contents from unforeseen events.
Requirement	Optional, not typically required by lenders.	Often required by mortgage lenders as a condition of the home loan.
Duration of Coverage	Usually annual contracts, renewable.	Ongoing, with premiums paid monthly or annually.
Transferability	Can often be transferred from one homeowner to another.	Usually specific to the homeowner and not transferable.
Limitations	Does not cover damage due to external events or disasters. May have limits on the age and condition of covered items.	Does not cover breakdowns due to wear and tear or aging of appliances and systems. Excludes certain natural disasters like floods or earthquakes unless specifically added.
Premiums and Deductibles	Annual fee plus service call fees/deductibles for repairs or replacements.	Monthly or annual premiums with deductibles that vary based on policy terms.
Claims Process	Service requests submitted to the warranty company for approved repair professionals.	Claims filed for covered events, often involving an assessment of damage and valuation of loss.
Common Add-ons	Coverage for additional items like pools, septic systems, and well pumps.	Coverage for high-value items, additional living expenses, and specific natural disaster protections.

What Homeowners Insurance Covers

Homeowners insurance protects against damage and loss caused by external events like fires, weather-related incidents, or vandalism. It is important in rebuilding and replacing lost or damaged property. For instance, if a storm damages the roof of your home, homeowners insurance will cover the cost of repairs. However, it does not cover breakdowns due to wear and tear or aging of home appliances and systems.

What a Home Warranty Covers

Conversely, a home warranty covers repairs and replacements of specific home appliances and systems due to everyday wear and tear or aging. Covered items usually include washers, dryers, HVAC systems, and electrical systems. Home warranties are beneficial for covering expenses that are not included in the home insurance.

Why Both Are Important?

Both home warranties and insurance policies are vital in reducing the financial burden of homeownership. They complement each other by covering different types of risks associated with owning a home.

Top 3 Home Insurance Providers:

Lemonade

Recognized as the best home insurance company for online service, Lemonade stands out for its digital-first approach, offering a seamless online experience for policy management and claims.

Hippo

Known for its added features, Hippo provides comprehensive coverage with unique benefits, catering to modern homeowners’ needs.

Erie Insurance

Distinguished for its wide range of coverage options, Erie Insurance offers extensive and customizable insurance policies, making it a top choice for various homeowner needs.

Top 3 Home Warranty Providers:

Select Home Warranty

Rated as the best for roof coverage, Select Home Warranty offers comprehensive plans that include unique coverage options, such as protection for roof leaks.

American Home Shield

Esteemed for its HVAC coverage, American Home Shield is recognized for its extensive coverage options and flexible plans, particularly beneficial for HVAC systems.

Liberty Home Guard

Known for its wide range of optional add-ons, Liberty Home Guard provides flexible and extensive coverage options, allowing homeowners to tailor their warranty plans to their specific needs.

FAQs

Are home warranties and homeowners insurance interchangeable?

No, they cover different aspects of home protection and should be used in conjunction.

What does a typical home warranty not cover?

Home warranties usually don’t cover cosmetic defects or damage due to neglect or abuse.

Is homeowners insurance mandatory for all homeowners?

While not legally mandatory, it is often required by mortgage lenders and covers a broad range of perils.

Conclusion

In summary, both home warranties and homeowners insurance offer crucial protection for different aspects of your home. Understanding their differences ensures you’re adequately covered for both unexpected events and the inevitable aging of home systems.