What Is The Difference Between Home Insurance And Home Warranties

Owning a home inevitably means facing unexpected repairs. From a broken-
down furnace to hail damage on the roof, fixes can add up fast. There are two
primary ways to limit your exposure to these surprise bills: Home insurance
and home warranties. Do you need both? Here are the main differences.


What is Home Insurance?

Homeowners insurance pays for damage to your home due to problems such as
fire, vandalism, explosions and more. It also covers your belongings and,
importantly, provides liability coverage if you’re sued—such as a lawsuit brought
by someone who is injured at your house.

Home insurance has some significant exclusions: floods, earthquakes and
landslides are some of the notable problems not covered. Home insurance also
won’t pay for wear and tear or mechanical breakdowns, like an air conditioning
system that suddenly stops working.


What is a Home Warranty?

A home warranty is not insurance, but rather a contract that covers certain
appliances and systems in your house. While manufacturer warranties cover
specific items for a particular time frame, home warranties can offer various
coverage levels and protect multiple items (depending on the contract).

Home warranties typically cover common systems and appliances such as:

• Heating, ventilation and air conditioning (HVAC) systems
• Plumbing
• Electrical systems
• Refrigerators
• Water heaters
• Washers
• Dryers
• Stoves

A home warranty won’t cover every issue, such as cosmetic damage, misuse and
maintenance problems that started before you bought the warranty. A home
warranty also won’t cover problems that fall under a home insurance policy, like fire damage.


Home Insurance vs. Home Warranties: Key Differences

Coverage. While home insurance covers structural damage to your house or
personal property, it doesn’t cover damage due to wear and tear on household
items such as appliances. Home warranties cover the cost of repairing or
replacing systems like plumbing but won’t pay for water damage caused by a leaky pipe.

Requirements. If you have a mortgage you’re likely required to have home insurance. Warranties, on the other hand, are optional. Sometimes the seller of a house will include a home warranty as a selling point of the property.

Claims. When an item covered under a home warranty breaks, you can request
service through the home warranty provider. They will then send out a repair
professional to assess and diagnose the problem. If they can’t repair the item, a
home warranty generally pays to replace it. Depending on your warranty, you
may run into coverage limits or extra fees that won’t cover the entire cost of the
repair, leaving you responsible for the remaining bill.

With a home insurance policy, an insurance adjuster will typically come out and
assess your damage and offer a settlement for repairs. Some home insurers
today use drones to evaluate damage, especially after a widespread disaster like a tornado.

If you have a damage claim your insurance check will be reduced by the amount of your deductible.

Home insurance coverage examples

• Damage from a kitchen fire
• Jewelry stolen while you’re on vacation
• Someone slips on your sidewalk and sues you

Home warranty coverage examples  

• Air conditioning breaks down
• Toilet needs repair
• Oven won’t heat up

Home warranties fill in many repair gaps for problems that home insurance won’t
cover. Buyers of new homes that have new appliances and systems likely have
far less need for a home warranty. But if you’ve got an older house and/or
​appliances that have seen better days, a warranty can be a way to cut your potential losses.




Author: Ashley Chorppening & Jason Metz
Source: © 2021 Forbes Media LLC.
Retrieved from: https://www.forbes.com
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