Homeowners Insurance vs. Home Warranty: What’s the Difference?
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Your home is likely your biggest asset and investment, so naturally you want to protect it. Homeowners insurance and home warranties both offer protection, but is a home warranty and home insurance the same? What is the difference?
Both of these types of plans offer value and aim to safeguard your property. However, each provides different types of protection. Learn how homeowners insurance vs. home warranty compare, their cost differences, and whether you need one or both.
Key Differences Between Insurance and Warranty Coverage
Is home warranty the same as home insurance?
Home insurance covers loss of personal property and structural damage resulting from life’s what-ifs —what your insurance company calls covered perils. Home warranty insurance, on the other hand, is a home service contract that covers repair or replacement costs resulting from the normal use of major home appliances and systems.
To better understand homeowners insurance vs home warranty, consider these factors.
Types of Events Covered
Understanding what homeowners insurance covers involves knowing the most common perils included in most comprehensive coverage plans. They include:
- Fire
- Explosion
- Riots
- Theft
- Volcanic eruption
- Weight of sleet, snow, or ice
Depending on your coverage limits, insurance may cover liability protection if you or someone in your household causes injury or property damage. It may also cater for additional living expenses if your home is deemed uninhabitable. However, events like floods and earthquakes usually require separate or additional coverage.
On the flip side, warranty coverage caters to wear and tear costs arising from appliances like:
- Dishwasher
- Cooktop/stove
- Refrigerator
- Washing machines
- Dryers
- Garbage Disposal
It also covers expensive repair or replacement costs arising from built-in systems like:
- Plumbing
- HVAC
- Electrical
- Water heaters
Structural vs. System Coverage
Home insurance offers financial protection against damage that specifically occurs inside and outside your home due to unexpected events. For example, if your stove explodes and destroys your kitchen and furniture, your insurance will cover your home’s structural damage as well as the loss of your personal property.
Alternatively, home warranty plans protect homeowners from the financial burden of repairing or replacing built-in home systems and appliances. They focus on malfunctions resulting from normal use, improper installation, mismatched systems, and poor repairs — not misuse or an accident.
Cost Comparison: Premiums vs. Service Fees
Just as home insurance and home warranties provide different types of protection, they also carry different costs.
Typical Insurance Premiums
Paying monthly or annual insurance premiums keeps your home insurance policy active. Your insurance company sets the average homeowners insurance cost you’ll pay based on certain factors, such as:
- Where you live
- Age of your home
- Your specific coverage policy limits
- Size of your home
- Condition of your home
- Your deductible
For example, Florida homeowners paid an average of $11,800 annually in home insurance premiums, one of the most expensive, compared to $918 for Vermont homeowners in 2024.
Home Warranty Pricing Models
A typical home warranty plan consists of an annual plan fee, or premiums, and per-service fees. Paid annually or monthly, the annual plan fee is the main cost of a home warranty and is based on your chosen warranty coverage and where you live.
On the other hand, service fees are the amount you pay each time you make a claim and a technician makes a service call or trade call. The average monthly cost for a home warranty is $53, approximately $605 per year.
Is Homeowners Insurance Required? Is a Warranty?
There’s no legal requirement to carry homeowners insurance or a home warranty. However, if you finance your home with a mortgage, your lender will insist on insurance to protect their investment.
As for how much homeowners insurance you need in this case, it’s a general rule that your policy should cover the full cost to rebuild your home in the event of a total loss. Once you’ve paid off your mortgage, you’re free to drop the coverage — but it’s wise to always keep a homeowners insurance policy in force even when it’s no longer mandatory.
Situations Where You May Need Both
Homeowners often want maximum protection for their homes. And because there’s not much overlap when it comes to home warranty vs. home insurance, getting both homeowners insurance and a home warranty plan is the best way to do this.
Even if you get an equipment breakdown endorsement as additional coverage in your insurance, it will only cover electrical and mechanical issues in your home — not the normal wear and tear of your appliances or built-in home systems.
How To Choose the Right Protection for Your Home
Wondering how to choose the right type of protection for your home? Here are some crucial factors to consider:
- Personal risk factors: Think of where you live, how many people stay in your home, and what expensive repair costs you would rather avoid when comparing home warranty vs. insurance options.
- Home age: Newer homes are less prone to plumbing, electrical, or appliance failures than those 15 years and older. However, older homes that have undergone recent renovations, like roof replacements, are more likely to attract lower insurance and warranty costs.
- Budget: Determine how much out-of-pocket costs you can handle when replacing personal property, rebuilding your home, or repairing high-ticket appliances and systems.
Get Tailored Protection That Matches Your Needs
Looking for the best home warranty or homeowners insurance? Browsing from one home insurance website and home warranty company to another can become hectic. At EverQuote, we provide a free and easy way to get the latest prices from the top home insurance companies. Get a custom comparison quote from EverQuote within minutes.
FAQs
What’s the difference between home insurance and home warranty?
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Premiums are sourced from over 30,000 zip codes across 200 insurance companies. We estimate premiums based on public filings for policies seeking 50/100 in liability with $500 deductibles for collision and comprehensive coverage. Estimated rates are based on a 35-year-old single female with a good credit score and no history of accidents or violations driving a 2023 Toyota RAV4 LE. We partner with Quadrant Information Services to source our data and assume no unique benefits or discounts are applied for these rates (unless otherwise stated). Your own rates may be different.