Home Warranty vs. Home Insurance

When buying a home, there are many things you can do to prevent being stuck with broken systems and appliances. However, if you are a new homeowner, you may not know exactly what kind of coverage you need. 

While your loan provider generally requires home insurance, you may also be interested in a home warranty to protect your systems and appliances. But what is the difference between a home warranty and home insurance? Let’s find out below.

What is a Home Warranty?

Home warranties cover the cost of any systems or appliances in your home should they break down due to normal wear and tear. These home warranties will cover a variety of items that are found in your home. Because many things in your home can break down unexpectantly, repairing or replacing them can be a significant and unexpected expense that can cost thousands of dollars.

Instead of draining your bank account when a vital system in your home breaks down, such as your air conditioning unit or refrigerator, you pay a monthly fee to your home warranty company. Then, if your system or appliance breaks down, you simply make a claim with your home warranty company and they will arrange for a technician to come out and repair or replace your system or appliance.

What Does a Home Warranty Cover?

The exact coverage that a home warranty will provide depends on the company. If you do want to learn more about what home warranties cover, we recommend that you check out our expert reviews of the top home warranty companies currently available.

Of course, this list is no master list, and companies will differ from one to the next, but you can use this below list as a guide for what home warranties generally cover. Additionally, many home warranty companies offer either systems plans or appliances plans. Sometimes, home warranty companies will even provide a complete coverage plan that includes systems and appliances.

The appliances that are generally covered under a home warranty include:

• Clothes washing machine
• Refrigerator
• Stove, oven, and ranges
• Built-in microwave oven
• Stove cook top
• Dishwasher
• Clothing dryer
• Garage door opener
• Ceiling fans
• Trash compactor
• Freestanding ice machines
• Smoke detectors
• Central vacuum
• Doorbells
• Humidifiers

The systems that are generally covered under a home warranty may include:

• AC and cooling systems
• Heating system
• Plumbing systems
• Electrical system
• Garbage disposal
• Water heaters
• Ductwork
• Plumbing systems
• Instant water dispensers

Alongside the home warranty basics, some companies offer add-on services if you want more coverage. Some of these add on items may include:

• Pools and spas
• Well pumps
• Septic pumps
• Roof leakage repairs

What is Homeowners Insurance?

Homeowners insurance is coverage for the structure of your home and the contents within. While home warranty plans are optional but recommended, home insurance plans are necessary. This is because home insurance plans will protect your home and possessions if you experience damage or theft.

If you are buying a home for the first time or even the 15th time, your mortgage lender will still require you to purchase a home insurance coverage policy for the full or fair value of your property. For the most part, your mortgage lender will not approve your loan unless you send them proof of this home insurance plan. Mostly, the insurance plan guarantees that your home will be covered should anything unexpected happen.

What Does Homeowners Insurance Cover?

Although home insurance plans are customizable, a standard home insurance policy does cover particular items. Typically, standard home insurance policies will cover the cost to fix your home should you experience any natural disasters (hurricanes, tornadoes, lightning, or other), fire, theft, and vandalism. However, many home insurance policies will require you to pay extra if you need earthquake or flood coverage.

Along with the structure of your home, your clothing, furniture, appliances, and other contents of your home will likely be covered if they are destroyed in a natural disaster. Typically, home insurance provides coverage for 50% to 70% of the amount of the insurance you have on your home’s structure. So, if you do have a lot of high-priced possessions, such as fine art, antiques, jewelry, or designer clothing, you may want to keep an itemized list (with receipts) of all your belongings.

Home Warranty vs. Homeowners Insurance

Now that we have gone through exactly what a home warranty is and what home insurance is, we can finally compare the two side by side. Generally, home warranties will cover systems and appliances that break down due to normal wear and tear.

On the other hand, home insurance policies are required by loan lenders and will protect your home from any losses or damages caused by natural disasters, fire, theft, and other problems. Home insurance policies also cover the structure of your home, such as broken windows, doors, and sometimes water damage.

For example, if you have a broken air conditioner that leaks water all over your home, the home warranty plan will likely cover the cost of fixing the AC unit. Still, the home insurance plan may help cover the cost of repairing the damage done by the excess water.

Who Are Home Warranties For?

Home warranties are for anyone who wants to be covered should an appliance or home system break down. Because you can never predict when these systems will need repair, having a good home warranty can reassure anyone that they won’t have to spend their savings and hard-earned money buying a new system or appliance.

Typically, home warranty plans are purchased by homeowners who want to ensure that they are covered if any of their systems or appliances break down suddenly. Even so, other people can benefit from purchasing a home warranty.

First of all, landlords who manage properties may consider purchasing a home warranty for their rentals. Because landlords cannot control what happens to their appliances or even monitor the appliances in the homes they regularly rent, having a home warranty can help provide tenants services should a system or appliance break down suddenly.

If the landlord did not have a home warranty plan, they might have to scramble to find an electrician, plumber, or technician who can come in and fix the appliance or system that’s broken. So instead of having to spend money out of pocket to buy a heater, fridge, or other appliance, you can simply call the home warranty provider to schedule a repair.

In addition, real estate agents or home sellers can also benefit from buying a home warranty. Real estate agents or those selling a house may buy a home warranty to help the new buyers have peace of mind knowing that the house will be covered if any systems or appliances break. It can be a great selling point for the home and a nice way to thank the buyers for using a real estate agent service.

Do I Need a Home Warranty if I have Homeowners Insurance?

So, do you need a home warranty plan if you have homeowners insurance? As we mentioned above, homeowners insurance must be purchased if you are buying a home with a mortgage. Whether you are a first-time homebuyer or purchasing 15 properties, you will need a home insurance plan for your mortgage lender to approve the loan.

Additionally, homeowners insurance only covers the structure of your property on your possessions should something get destroyed by a natural disaster. However, home insurance policies do not cover your systems or appliances if they break down from normal wear and tear. So, if your old refrigerator suddenly gives out, your home insurance policy is not going to cover the repair or replacement of that refrigerator.

This is why you want to purchase a home warranty plan. That way, if any of your systems break down and you need to buy a new one or call a technician to repair it, your home warranty provider can help cover most of the cost to fix or repair it. So instead of paying thousands of dollars to purchase new appliances and systems, your home warranty provider can help make the entire process easy.

Is it Worth Getting a Home Warranty?

If you have a broken system or an appliance, it can cost thousands of dollars to fix. These thousands of dollars are not planned for most of the time and can take homeowners by surprise.

For a small monthly payment, you can rest easy knowing that your home appliances and systems are covered should they break down. That way, you won’t have to worry about paying thousands of dollars out of pocket. That said, you should check out our home warranty reviews that go in-depth on the best home warranty companies in your area.

When Do You Need a Home Warranty?

When looking through home warranty plans, you may be wondering when exactly you need a home warranty. While we believe that every single person could benefit from having a home warranty, there are some specific instances and criteria that you might need to decide when you need a home warranty. Check out the sections below to figure out if you need a home warranty now.

You Just Bought a House

If you are a new homeowner, getting a home warranty for your first house is one of the safest options you can choose. Because many first time home buyers do not know about all the costs that will go into buying a new home, having a home warranty may just be one of the best options you make about your new home.

Many new homeowners also wonder what the difference is between home insurance and a home warranty. While a home insurance policy is required for your loan lender because it will cover the cost of damage to the structure of your home, a home warranty plan will cover your systems and appliances within the home. So if your refrigerator breaks down, your home insurance plan will not cover that appliance. However, your home warranty plan will likely cover your refrigerator.

Additionally, many new homeowners find that they spend a lot of money on new projects in their home. So if you already have all your money tied up in home improvements and one of your systems or appliances breaks down, you may find yourself in a financial problem, So if you have a home warranty in place, you won’t have to worry about those unexpected costs.

You Are Selling Your House

Along with new homeowners, getting a home warranty if you are selling your house is also a great idea. While at first this may not make sense since you’re trying to sell your home and move away, having a home warranty for the first year of your home may be a great incentive for potential buyers.

First of all, having a home or into you as part of a gift to a new buyer ensures that you are confident that the appliances are running well, and that the new homeowner won’t have to worry about them breaking down. But, if the appliances systems do have problems within the first year of moving into the new home, the homeowners can simply call up the home warranty company and have someone up to fix it.

So, having a home warranty out on your home for the first year for a new occupant may be the difference between selling your home or letting it sit on the market for days, weeks, or even months.

You Have Appliances that Don’t Have Individual Warranties

Many home warranty companies do not cover systems or appliances that have individual warranties out on them. Typically, you will buy these individual warranties when you purchase a new appliance or system. For example, many of the leading brands or home improvement stores will offer warranties out on their appliances when you buy them.

However, these warranties don’t typically last forever. So, you may want to take out a home warranty once all these other individual warranties expire. That way, you can still have all your systems and appliances covered by your home warranty. Additionally, you can still take out a home warranty on the rest of these systems and appliances in your home even if one of your appliances has an individual warranty on it. So, this is still a great option for anyone who is a homeowner.

Appliances and Systems Are Older Than One Year

Typically, systems and appliances should last a long time. However, if your system or appliance is older than one year, you should probably take out a home warranty. Because things can happen unexpectedly, making sure that all of your systems and appliances are covered is the best option.

When you first get a new system or appliance, it should work well and flawlessly. Even so, after a year of regular use the system or appliance may need a technician to come out and fix it if something goes wrong. Remember, things happen, and breakdowns can occur unexpectedly.

Appliances and Systems Are in Working Condition

Now, you may be wondering why you need a home warranty all in working condition. This is because even though all of your systems and appliances work well now, there’s no way to predict how they will work in the months and years to come. Because systems and appliances are not permanent solutions, they are prone to normal wear and tear and can breakdown unexpectedly.

So, if you have systems and appliances that are currently working, you should absolutely put in a home warranty. This is also a great time to get a home warranty because most home warranty plans do not covered pre-existing conditions. A pre-existing condition is a problem or broken part of a system or appliance that a curd and is known before the home warranty plan is put in place.

That said, if you have a broken refrigerator and decide to take out a home warranty, you will likely have to wait a couple of weeks before you can make a claim. Even then, the home warranty company may not cover the broken parts of your refrigerator. So, you should take out a home warranty plan on your systems and appliances when they are still working so that you can help get them covered if they breakdown.

You Want to Keep Your Appliances for Years to Come

If you want your systems and appliances to last as long as they possibly can, you should go to home warranty plan. This is because the home warranty company can come and fix systems and appliances and make sure that they work for as long as they possibly can. Additionally, making sure that you take care of your systems and appliances by providing regular maintenance and cleaning, they can last for many years. 

When your systems and appliances do inevitably breakdown, your home warranty company will also help you replace that system or appliance. Especially if your system or appliance breaks down due to normal wear and tear, your home warranty company will help cover the costs to fix or update your system or appliance.

You Don’t Want to Have to Replace Your Appliances All the Time

Let’s face it, you don’t want to have to spend all of your money on updating systems and appliances. It can be a real bummer to have to spend your entire paycheck on buying a new refrigerator, replacing your AC system, or finding a new oven or dishwasher. Instead, you should get a home warranty plan so that you can have your systems and appliances replaced in a way that does not break your bank.

By having a home warranty out on your home systems and appliances, you can rest easy knowing that you will not be solely responsible for covering the cost of broken systems and appliances. They are absolutely worth the money and will definitely save you funds in the long run.

Final Thoughts

Now that you know when you should get a home warranty, it’s time to start your search. Finding the best home warranty company can take a significant amount of time if you don’t know where to look. That is why our experts have reviewed the best home warranty companies and have created detailed reviews of each one. So instead of researching all the potential home warranty options in your area, just check out our home warranty reviews to get the best information about your new home warranty.