Homeowners Insurance vs. Home Warranty: A Clear Breakdown for Every Homeowner

When it comes to protecting your home, understanding the difference between homeowners insurance and a home warranty is essential. Though they sound similar, they serve very different purposes. In this comprehensive guide, we’ll break down homeowners insurance vs home warranty to help you make informed decisions about your home protection strategy—whether you're a first-time homebuyer or a seasoned property owner.

The Basics: What is Homeowners Insurance?

Homeowners insurance—sometimes referred to as home insurance or house insurance—is a type of property insurance that covers damage to your home's structure, your personal belongings, and liability for accidents that happen on your property.

What Does Home Insurance Cover?

A standard home insurance policy typically includes:

• Structural damage from perils like fire, wind, hail, and vandalism
• Personal property coverage for stolen or damaged belongings
• Liability protection if someone is injured on your property
• Additional living expenses (ALE) if you're displaced due to a covered event

Natural disaster coverage, such as for floods or earthquakes, is not included in most base policies and usually requires optional coverage or separate policies.

Learn more about insurance exclusions and add-ons in Noble Quote’s Learning Center.

The Basics: What is a Home Warranty?

A home warranty is a service contract that covers repairs or replacement of major systems and appliances that fail due to normal wear and tear. This can include your HVAC system, electrical systems, plumbing, and more.

What Does a Home Warranty Cover?

Depending on the home warranty plan you choose, coverage typically includes:

• Major appliances (e.g., refrigerators, ovens, washers, dryers)
• Home systems (e.g., plumbing coverage, electrical system coverage, HVAC)
• Optional roof leak coverage in some cases

Unlike insurance, home warranties do not cover property damage, accidental damage, or issues caused by natural disasters. They’re designed for unexpected repairs of items due to age and routine use.

The Key Differences: Homeowners Insurance vs Home Warranty

Do Mortgage Lenders Require a Home Warranty?

No, mortgage lenders do not require a home warranty. However, they do require homeowners insurance as a condition of lending to protect their investment in your property.

Cost Comparison: Home Warranty vs Homeowners Insurance

How Much Does Homeowners Insurance Cost?

• Average: $1,800/year
• Varies by location, home value, deductible, and coverage limits

How Much Does a Home Warranty Cost?

• Monthly: $30–$75
• Annual: $350–$800+
• Service fees are additional per claim

Coverage in Action: Real-Life Scenarios

Scenario 1: Your Dishwasher Breaks Down

• ✅ Covered by home warranty
• ❌ Not covered by homeowners insurance

Scenario 2: Tree Falls on Your Roof

• ✅ Covered by homeowners insurance
• ❌ Not covered by home warranty

Scenario 3: A Guest Slips and Falls at Your House

• ✅ Covered under liability coverage of your homeowners insurance

Scenario 4: Your Water Heater Leaks Due to Age

• ✅ Covered by home warranty (if it’s included in your plan)
• ❌ Not typically covered by homeowners insurance

Understanding these examples helps clarify the difference between home insurance and home warranty.

Pros and Cons of Each

Homeowners Insurance

Pros:

• Required for mortgage
• Covers catastrophic loss
• Protects personal belongings
• Liability protection

Cons:

• High deductible
• Doesn’t cover maintenance issues or appliance breakdowns

Home Warranty

Pros:

• Budget-friendly peace of mind
• Covers major appliance breakdown
• Low service fee vs large repair cost

Cons:

• Doesn’t cover structural damage
• Coverage limits may apply
• May deny claims due to improper maintenance or exclusions

Can You Have Both?

Yes—and many homeowners do. Combining homeowners insurance and a home warranty creates a layered defense against both catastrophic damage and the slow breakdown of everyday systems.

• Home insurance = structural & liability protection
• Home warranty = system & appliance repair protection

Who Should Consider a Home Warranty?

• Buyers of older homes with aging systems
• First-time homeowners unfamiliar with repair costs
• Sellers looking to attract buyers (home warranty vs homeowners insurance for sellers)
• Landlords managing rental properties

Still wondering “should I get home warranty with old appliances?” The answer is often yes—if those appliances aren’t covered under a manufacturer’s warranty or have shown signs of decline.

What Doesn’t Each Cover?

What Does Home Insurance Not Cover?

• Wear and tear
• Mechanical failure
• Pest damage
• Maintenance neglect
• Appliance breakdowns

What Does a Home Warranty Not Cover?

• Pre-existing issues
• Improper installation
• Unpermitted work
• Items not listed in your contract
• Structural damage or property loss

Home Warranty vs Emergency Fund

Some homeowners wonder: “Is it better to save money for repairs or pay for a home warranty?”

If you're disciplined about saving, an emergency fund offers flexibility. But a warranty can provide predictable repair costs, especially if your HVAC system, appliances, or plumbing is nearing the end of its useful life.

Wear and Tear vs. Accidental Damage

This distinction is crucial:

• Wear and tear = Covered by a home warranty
• Accidental damage = Covered by homeowners insurance

Knowing the difference helps avoid frustration when filing claims.

Final Thoughts: Which Is Right for You?

Choosing between homeowners insurance vs home warranty isn’t an either-or decision—it’s about understanding how they work together to protect your most valuable asset.

• For unexpected disasters and liability? You must have homeowners insurance.
• For aging appliances and systems? A home warranty may be worth it, especially in homes more than 5–10 years old.

Both serve different but complementary roles in your total home protection strategy.