What’s the Difference Between Home Insurance and Home Warranty Coverage?

Updated May 2021

As home warranties become a more popular investment for homeowners across the United States, many people previously unfamiliar with the service are wondering how home warranty coverage compares to traditional homeowner’s insurance. Understandably, homeowners are reluctant to purchase a home warranty if coverage will overlap with their existing insurance policies.

Home warranties and homeowner’s insurance operate on a similar principle, but they otherwise have little in common. If you already have insurance, you can purchase a home warranty without worrying about paying for redundant coverage. Let’s take a closer look by comparing a typical home warranty vs. home insurance policy.

Homeowner’s Insurance

Let’s begin with homeowner’s insurance. This is a policy to protect your home and belongings from damage that occurs in certain circumstances. While it’s not necessarily a prerequisite for homeownership, virtually all homeowners have insurance. Other than insurance being a plainly good idea for something as expensive as a house, many banks will not provide a mortgage unless the homeowner presents proof of insurance.

While the terms of insurance policies vary, standard coverage protects your home, other structures on your property, and your personal belongings. They can also cover liability for damage to someone else’s property. A policy will pay only in certain circumstances, however. Standard insurance policies cover damage or losses sustained by the following things:

• Fire
• Lightning
• Wind
• Hail
• Theft

Some policies provide coverage in the event of an earthquake, flood, or other natural event, but this usually costs extra. Insurance will not typically repair or replace your belongings if they are damaged from general use.

Home Warranty Insurance: What Does It Cover?

Home warranties are sometimes referred to as home warranty insurance, but this is a bit of a misnomer. A home warranty isn’t an insurance policy in the strictest sense of the word. It’s more appropriately described as a service contract.

The homeowner pays a premium, just as with an insurance policy. In return, the warranty provider will arrange to have a technician visit the home to service, repair, or replace any appliances or systems that are covered by the warranty.

Unlike insurance, a home warranty doesn’t usually cover the overall structure of the home. Instead, it provides coverage for home systems and appliances. A typical home warranty can cover the following:

• Plumbing, electrical, and HVAC
• Refrigerators
• Washers and dryers
• Dishwashers
• Ovens, cooktops, and ranges
• Septic systems
• Electronics
• Sprinkler systems
• Water softeners

The above is not an exhaustive list. A home warranty can protect virtually anything. It can even provide home services, such as carpet cleaning, re-keying, and pest control.

And here’s a critical difference when comparing a home warranty vs. homeowner’s insurance: A home warranty will cover items that malfunction due to general wear and tear.

Most home warranties will not cover items that are damaged from misuse or abuse, and they will not usually cover personal property lost to theft or natural disasters. After all, that’s what homeowner’s insurance is for!

What Is a Home Warranty?

In simple terms, a home warranty is a service contract to maintain, repair, and potentially replace critical home appliances and systems. Homeowners may purchase coverage themselves from a home warranty company, but it is also common for home sellers or realtors to transfer a policy to a home’s new owners.

A home warranty provides a level of home protection that a home insurance policy does not. A dishwasher leaking water on the floor; a refrigerator on the fritz; a faulty light switch—these are the kinds of problems that a home warranty can resolve. Homeowner’s insurance, on the other hand, does not cover individual appliances or system components that fail due to age or general wear and tear. This is the important difference between home warranty and insurance coverage.

A home warranty is meant to save homeowners money and insure against the high costs of inevitable home repairs. With the right plan, you will spend less on coverage than you would have spent paying for home repairs out of pocket.

Where to Acquire Home Warranty Coverage?

Acquiring home warranty coverage is remarkably easy. As touched on above, buyers of a new home may inherit a policy from the home’s previous owners. It is also possible to receive a home warranty as a gift from a real estate agent when a home’s sale is finalized. In these cases, homeowners usually receive one year of coverage. If they want to extend their coverage beyond that year, they can request a new contract from their warranty provider.  

Homeowners can also purchase their own policy directly from a home warranty provider like Liberty Home Guard. Our website provides an overview of our plans and policies. Once you have an idea of the level of coverage that would be appropriate for your home, you can request a free quote through our website or talk with a member of our team by calling (833)-544-8273.

How to Choose Between Insurance and a Warranty?

Some prospective buyers venturing into the real estate market feel torn between buying an insurance policy and home warranty policy, but the truth is they should not have to choose. A home warranty was never meant to replace home insurance. The policies have different uses and different forms of coverage.

Home insurance covers your home and belongings in the event of theft, natural disaster, or some other calamity. A home warranty covers specific home appliances and system components, and it can provide some home services, such as pest control or gutter cleaning.

Think of it this way: If your washing machine malfunctions and requires a repairperson, you would file a claim with your warranty provider. If a tree falls on your home and crushes your washing machine in the process, you would file a claim with your insurance company. These policies are meant to complement each other, not compete with each other.

Home Warranty Vs. Appliance Warranty

In researching warranties and insurance policies, you may also come across appliance warranties. These may or may not be synonymous with home warranties. Here’s why.

Many appliances, large or small, have a manufacturer’s warranty. These can last anywhere from a couple of months to several years. They are essentially a company’s guarantee that their product will work properly for a certain amount of time. Sometimes, “appliance warranty” may actually refer to the manufacturer’s warranty.

Once the manufacturer’s warranty is expired, you can get a home warranty from a third party for extended coverage. So, some people may use “appliance warranty” to refer to a service contract or home warranty on a specific appliance.

Get Comprehensive Coverage With Liberty Home Guard

Hopefully, you’re no longer left wondering, “how is home warranty different from home insurance?” If you have any lingering questions, or just want to further investigate getting a home warranty to fully protect your personal property, you can speak with our team at (833)-544-8273.