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

Home warranties and homeowners insurance cover different types of problems.
Whitney Vandiver
By Whitney Vandiver 
Updated
Edited by Claire Tsosie

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Nerdy takeaways
  • Both home warranties and homeowners insurance can help pay to repair or replace appliances and household systems, but they apply in different situations.

  • A home warranty covers wear and tear, while home insurance pays for issues caused by things such as fire or storms.

  • Adding equipment breakdown coverage to your home insurance policy can offer extra coverage for household appliances.

Nerdy takeaways
  • Both home warranties and homeowners insurance can help pay to repair or replace appliances and household systems, but they apply in different situations.

  • A home warranty covers wear and tear, while home insurance pays for issues caused by things such as fire or storms.

  • Adding equipment breakdown coverage to your home insurance policy can offer extra coverage for household appliances.

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 have home insurance — but is it going to cover both issues? Or do you need a home warranty plan as well?

Both homeowners insurance and a home warranty can help pay to repair or replace your appliances or major home systems but in different scenarios. A home warranty pays for wear and tear, and homeowners policies cover issues related to property damage such as a fire or storm.

Your mortgage lender probably requires that you have homeowners insurance, but a home warranty is optional. Here’s what you need to know about how their coverage differs.

Home warranty vs. home insurance: The basics

A home warranty is a service contract for major appliances and household systems when they break down because of everyday use. 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.

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 and break-ins. Homeowners insurance policies specifically exclude problems due to wear and tear.

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.

Home warranty vs. home insurance: Coverage

Depending on the plan, home warranties can cover appliances, systems or both. Home insurance generally covers more items and structures because it’s meant to protect the entire house, not just appliances and systems.

Item

Home warranty

Home insurance

Built-in appliances

Yes.

Yes.

Major home systems (like A/C)

Yes.

Yes.

Pools

Yes.

Yes.

Primary house structure

Only certain areas if damaged during repair.

Yes.

Secondary structures

Sometimes, if you purchase additional coverage.

Yes.

Electronics (such as computers or TVs)

Depends on the plan.

Yes.

Home warranty coverage listed in this table is for normal wear and tear. Coverage listed in this table for home insurance is for situations specified in a homeowners insurance policy, such as a fire.

Read more on NerdWallet about home warranty coverage and homeowners insurance coverage.

Home warranties and home insurance policies also apply coverage in different situations.

Cause

Home warranty

Home insurance

Structural damage caused by appliances or systems

No.

Yes.

Natural disasters

No.

Yes, but generally not floods, earthquakes or high-wind events such as hurricanes.

Everyday wear and tear from use

Yes.

No.

Home warranty coverage listed in this table is for normal wear and tear. Coverage listed in this table for home insurance is for situations specified in a homeowners insurance policy, such as a fire.

Are floods, earthquakes or high-wind events such as hurricanes or tornadoes common in your area? If so, you might benefit from an additional policy to protect your house. Ask your home insurance provider about coverage for floods, earthquakes or windstorms.

Home warranty vs. home insurance: Waiting periods

Most home warranty plans require customers to wait 30 days before submitting a claim. 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 also don't cover pre-existing issues.

Home warranty vs. home insurance: Cost and fees

Type of cost

Home warranty

Home insurance

Average annual premium, according to NerdWallet's analysis

$701.

$1,915.

Additional fees

Service fee ranges from $69 to $150 and increased premium for optional coverage.

Increased premium for optional coverage.

Deductibles

No.

Yes.

A home warranty can cost anywhere from about $240 to more than $1,400 per year, depending on the plan. Homeowners insurance, on the other hand, can be as low as $515 to more than $5,495 annually, according to NerdWallet's analysis. For both types of coverage, the more coverage you choose, the higher the cost.

Home warranties usually come with a service fee that you’ll pay each time a technician comes to your house, even if your warranty doesn't cover the resulting repairs

Most homeowners policies have a deductible, which is the amount you have to pay before your insurer will cover your claim. Fore example, 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 after you pay your deductible.

Home warranty vs. home insurance: Claims

If you need your home warranty company or insurer to help with a problem, you’ll have to reach out to them directly to submit your claim.

Process

Home warranty

Home insurance

You pay your fee or deductible before knowing if your claim is approved.

Yes.

No.

The company sends out a professional to review the issue or damage.

Yes.

Yes.

You can choose the professional that repairs the issue.

Depends on the provider.

Yes.

The amount eh company or insurance provider pays you might not cover the entire repair.

Yes.

Yes.

You generally have to pay a portion of a repair with both home warranties and home insurance policies. The major difference is that home warranties usually require you to pay a service fee before a claim is approved (it covers the cost of a technician coming to your house to look at the problem) and home insurance policies only make you pay your deductible if your claim is approved.

Both types of coverage will send out a professional to evaluate the claim — a technician for a home warranty and an adjuster for insurance. Some home warranty companies will let you choose your technician in certain situations, but most insurance adjusters are chosen by the insurance provider.

You might also have to pay more toward a repair than just your service fee or deductible in some scenarios, such as:

  • The problem is caused by something that your contract or policy doesn’t cover.

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

  • You choose to buy a higher-end replacement appliance than what you had before or what the provider is willing to purchase.

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Home insurance vs. home warranty: Pros and cons

Because there’s not much overlap between homeowners insurance and home warranties, some homeowners choose to have both for the most comprehensive coverage of their 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

Pros

Cons

Might save you money on expensive repairs.

May be expensive, especially for more comprehensive plans.

Covers problems your homeowners policy won't cover.

Coverage caps, service fees and exclusions may limit your payouts.

Can provide peace of mind when buying a new house.

Might not approve all claims, leaving you to pay out of pocket.

Home insurance

Pros

Cons

Covers your entire home, not just major systems and appliances.

Won't cover wear and tear.

Often covers other structures like detached garages and guest homes.

Deductibles may be high.

Can pay additional living expenses if you need to move out during covered repairs.

Might not approve all claims, leaving you to pay out of pocket.

Optional equipment breakdown coverage on a home insurance policy

Pros

Cons

Cheaper than a home warranty.

Not available from all insurers.

Covers electrical and mechanical breakdowns.

Doesn't cover wear and tear.

Often easy to add to an existing homeowners policy.

Claim payouts are subject to a deductible.

NerdWallet writer Sarah Schlichter contributed to this article.

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