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

You head to the kitchen for a snack, only to discover that the fridge isn’t working. The hummus you wanted is at room temperature, and the milk is already starting to smell a little funky. You need a service technician and maybe a new refrigerator. But who’s going to foot the bill?

Both homeowners insurance and a home warranty can help pay if something goes wrong with your appliances or major home systems, but they cover different scenarios. The primary difference between a home warranty and home insurance is that warranties pay for wear and tear, while homeowners policies cover unexpected problems like fires or storm damage.

Dive deeper into the differences between home insurance and home warranties below.

Home warranty vs. home insurance: The basics

A home warranty is a service contract for major appliances and household systems. If your water heater stops working or your air conditioning unit isn’t running properly, a home warranty can pay for a technician to fix the problem. It can also supply a replacement if the appliance is beyond repair.

» MORE: What is a home warranty?

Homeowners insurance has a broader scope. It covers not only appliances and household systems but also everything else in your house — including all of your belongings and the structure of the building. It covers detached structures too, such as sheds or fences.

Unlike a home warranty, home insurance pays for damage from sudden, unexpected events like fires, windstorms, lightning and hail. Homeowners insurance policies specifically exclude problems due to wear and tear.

» MORE: What is homeowners insurance?

Many homeowners insurance companies offer an option called equipment breakdown insurance that you can add to your policy. This coverage pays for damage to appliances or household systems from sudden electrical or mechanical failures. Examples could include a power surge that fries your pricey gaming laptop or a pressure rupture that ruins your water heater. However, equipment breakdown insurance generally won’t pay for problems from wear and tear.

» MORE: What is equipment breakdown insurance?

What’s covered?

Details vary from one warranty or insurance policy to another, but below are some basic outlines of the coverage you can expect.

Home warranty

Home warranties cover problems due to normal wear and tear, but your specific contract will determine which parts of your home are covered.

You can typically choose from multiple home warranty plans with different levels of coverage. For example, you may see plans that pay for problems with major appliances such as:

• Refrigerators.

• Washers and dryers.

• Dishwashers.

• Stoves/ovens.

• Built-in microwaves.

• Garbage disposals.

Companies offering appliance-only plans may also have separate plans that cover systems such as:

• Heating and cooling.

• Plumbing.

• Electrical.

• Water heaters.

• Ductwork.

Higher-tier plans can cover all of the above and more.

Things like swimming pools, well pumps, central vacuum systems and home electronics are optional add-ons with some warranties.

Learn more about what home warranties cover.

Home insurance

As noted above, homeowners insurance covers just about every appliance and system in your home for certain events, known as “perils” in the insurance industry. If a kitchen fire damages your refrigerator and stove, for example, your policy would generally pay to repair or replace them. Other covered perils include scenarios like wind, hail, lightning, smoke and theft.

Homeowners insurance may also cover secondary damage due to a problem with an appliance or system. For instance, if your dishwasher hose bursts, sending water all over your kitchen, your homeowners policy could pay to replace any damaged furniture or floors. However, it wouldn’t pay to fix or replace the dishwasher itself unless you had equipment breakdown coverage on your policy.

Depending on your carrier, equipment breakdown insurance may cover:

• Heating and air-conditioning systems.

• Refrigerators.

• Washers and dryers.

• Dishwashers.

• Home security systems.

• Boilers, furnaces and water heaters.

• Ovens and stoves.

• Well pumps.

• Electrical systems.

• Riding mowers.

• Computers and other electronics.

• Swimming pool equipment.

Equipment breakdown coverage pays for breakdowns due to electrical or mechanical failures, but not wear and tear.

» MORE: What does homeowners insurance cover?

What’s not covered

Both home warranty contracts and insurance policies have detailed terms and conditions that could affect how much coverage you actually have. Keep an eye out for exclusions like the ones below.

Home warranty

Your warranty probably won’t cover:

Issues from lack of maintenance. Appliances and mechanical parts naturally wear out over time, but if your furnace dies because you haven’t changed the filter in three years, your home warranty likely won’t cover it.

Improper installations. In addition to proper maintenance, home warranty companies generally require your appliance to have been installed according to manufacturer specifications.

Accidents and disasters. Warranties are meant for normal wear and tear, not damage from fires, floods or electrical surges.

Secondary damage. If a problem with your water heater leads to a leak that damages your floor, the warranty will cover only the appliance — not the floor.

Pre-existing problems. You can’t find a malfunction in your clothes dryer and then buy a warranty to pay for the fix.

Appliances, systems or parts not named in your warranty. This is where it pays to read all that fine print. In one service contract we reviewed, we found that the company would cover many components of your refrigerator, but not the ice crusher, the dispenser, the touch panel or leaks of any kind. It will also pay no more than $200 for the ice maker (which costs an average of $300 to $420 to replace, according to HomeAdvisor^[0]

Home insurance

Most homeowners policies won’t cover:

Flood damage. In the insurance industry, flooding means storm surges, overflowing bodies of water and heavy rainfall that can’t drain quickly enough. To have coverage for this type of damage, you’ll need separate flood insurance.

Earthquake damage. If you live near a fault, you may want earthquake insurance, because standard homeowners policies won’t pay for damage due to earth movement.

Maintenance or wear and tear. Homeowners insurance is designed for the unexpected, and therefore won’t pay to service your appliances or replace them when they wear out.

Pest damage. If termites, rodents or other pests damage your home systems, your policy generally won’t help with repairs. Dealing with pests is considered part of your responsibility as a homeowner.

» MORE: 10 home insurance exclusions you need to know

Waiting periods

A home warranty typically doesn’t kick in right away. Many plans have a 30-day waiting period before you’re eligible for service claims. This helps prevent fraud by keeping people from signing up to fix a problem that just happened.

Home insurance policies usually take effect more quickly, but they won’t cover pre-existing issues either.

Cost, service fees and deductibles

A home warranty may cost anywhere from $300 to more than $1,000 per year, depending on the plan you choose. Higher tiers of coverage or optional add-ons will increase your cost.

You’ll also need to pay a fee each time you make a service request and a technician comes to your house, whether or not your warranty ends up covering the resulting repairs. The service fee typically ranges from $50 to $150 per visit.

The average cost of homeowners insurance in the U.S. is $1,915 per year, according to NerdWallet’s rate analysis. (Of course, this price covers your entire home, not just your appliances and major systems.) Adding an equipment breakdown endorsement to your policy usually costs an extra $25 to $50 per year.

Most homeowners policies have a deductible, which is the amount your insurer will subtract from your claim payout. Say a storm knocks out your air-conditioning unit. If it needs $2,100 worth of repairs and you have a $1,000 deductible, your policy would cover $1,100.

Equipment breakdown coverage often has its own deductible, such as $500.

» CALCULATOR: Estimate your home insurance cost

How claims work

If you need your home warranty company or insurer to help with a problem, you’ll have to reach out to them directly. Here’s how the process works.

Home warranty

After you contact your home warranty company, it will arrange for a service technician to come to your home, diagnose the problem and fix it if possible. The technician may need to come back again for replacements or more extensive repairs.

Home warranty companies generally have their own networks of service providers, so you may not be able to choose your own preferred contractor.

In the best-case scenario, the home warranty company will fix the issue or replace the broken appliance, and your only expense will be the service fee. However, you could end up paying more if:

• The problem is caused by a component your contract doesn’t cover.

• There’s a disposal charge for an old part or appliance.

• The cost of a replacement item is higher than your coverage limit.

• Upgrades are needed to meet current building codes.

» MORE: Are home warranties worth it?

Home insurance

You can usually file a homeowners claim online, through your insurer’s app or over the phone. To handle your claim, the company will assign an adjuster, who will evaluate the damage and whether it’s eligible for coverage under your policy.

If your claim is approved, the insurance company will issue a payment (minus your deductible) that you can put toward repairing or replacing your damaged property. It’s up to you to choose a contractor and schedule service. However, your insurer may be able to recommend a contractor if you can’t find one.

As with a warranty, you could end up paying more than your deductible. This could happen if:

• Your policy doesn’t cover the damage.

• The cost to repair the damage is above your coverage limit.

• You need to make upgrades to meet current building codes and you don’t have ordinance or law coverage on your policy.

• You choose to buy a higher-end replacement appliance than what you had before. (Insurance policies typically pay only for a replacement of similar kind and quality to what you previously had.)

» MORE: How to file a home insurance claim

Home insurance vs. home warranty: Bottom line

Because there’s not much overlap between homeowners insurance and home warranties, you may want to consider having both for the most comprehensive coverage of your appliances and home systems. An equipment breakdown endorsement on your homeowners policy can be a cheaper alternative to a home warranty, covering electrical or mechanical problems. However, it won’t cover simple wear and tear.

If you have a mortgage, your lender probably requires you to have homeowners insurance. But adding equipment breakdown coverage or a home warranty is optional. Before shelling out for either of them, read the terms and conditions carefully to make sure you understand what coverage you will — and won’t — get.

Below are the pros and cons of each option at a glance.

Home warranty

Home insurance

Equipment breakdown coverage