Insurance vs. Home Warranty: What's the Difference?

Written by Whitney Bennett of Landmark Home Warranty
Updated June 15, 2016
Home warranty
Maintaining and taking care of your home will prevent damages and expenses, but having a home warranty and insurance can reduce stress and give you peace of mind. (Photo by Eldon Lindsay)

It's important to know the difference between a home warranty and homeowners insurance.

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Buying a first home is a tremendous achievement, but transitioning from renting to owning comes with new and unexpected expenses, like a home warranty and a homeowners insurance policy. Unfortunately, many new (and experienced) homeowners confuse the two and assume they're the same, and offer the same type of coverage.

However, that is not the case. A home warranty and an insurance policy cover different items. Homeowners should consider both in order to protect their assets and avoid paying thousands of dollars in damages.

Protect your home’s structure and belongings

Homeowners insurance is typically well known because it's mandatory if you have a mortgage. Lenders won't agree to give homeowners a mortgage until they buy an insurance policy.

Insurance protects the interior and exterior of your home from damages as a result of inclement weather, falling trees and other disasters. If your belongings are damaged in one of these incidents, homeowners insurance covers them, too.

Save on appliance repairs and replacements

Unlike insurance, home warranties are optional, but they can be beneficial. You can purchase a home warranty at any time; most often they're included with the sale of a new house. In some cases, you can negotiate a home warranty when you purchase the property, or it can transfer from the seller to the new owner. Keep in mind that this is not the case with homeowners insurance.

Home warranties typically cover electrical, plumbing, heating and cooling systems, and other major household appliances like the oven and dishwasher. If your unit breaks due to age or wear and tear, you’ll most likely only be required to pay the service fee to get the unit repaired or replaced. The rest is covered by the home warranty company.

However every policy is different; some may require you to provide past maintenance records prior to any service or compensation occurs.

Read the fine print

As always, read the fine print before you sign. Some home warranty policies may not be all-inclusive, so make sure you know exactly which systems and appliances are covered.

In addition, your warranty policy may have a clause that states your appliances are not covered if damaged due to abuse or neglect. 

The same can be said for homeowners insurance policies. Your home may cover only certain types of damages, like damages due to tornadoes but not hurricanes, or damages caused by natural disasters, but not by the homeowner. 

Common problems like mold and termite infestation are usually not covered by home insurance. Also, if your home is located in an area frequently hit by tornadoes, for example, you may have to pay for additional coverage.

In order to protect yourself and your assets, make sure you understand what your policy covers. Always ask questions if you are unsure so there are no surprises.

Editor's note: This is an updated version of an article originally posted on August 5, 2015.

Did anything about your home warranty or homeowners insurance surprise you? Tell us about it in the comments section below.

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About this Experts Contributor: Whitney Bennett is an SEO Specialist with Landmark Home Warranty, providing home warranty service in Salt Lake City. Since 2004, Landmark has specialized in home warranties. You can follow this contributor on Twitter.

As of June 15, 2016, this service provider was highly rated on Angie's List. Ratings are subject to change based on consumer feedback, so check Angie's List for the most up-to-date reviews. The views expressed by this author do not necessarily reflect those of Angie's List.

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