Homeowners insurance covers damage from events like fire, storms, theft, vandalism, and certain natural disasters. If a tree falls on your roof or a pipe bursts and floods your living room, your home insurance pays for the structural damage. Your mortgage lender requires this coverage.
Home insurance does not cover normal wear and tear, mechanical breakdowns, or appliances that stop working because they're old. If your 12-year-old water heater fails on a Tuesday morning for no dramatic reason, your home insurance claim will be denied.
A home warranty — technically a home service contract — covers the repair or replacement of your home's major systems and appliances when they break down from normal use. This includes your HVAC system, plumbing, electrical, water heater, refrigerator, oven, dishwasher, washer, dryer, and more.
When something breaks, you call your warranty company, pay a service fee (typically $75 to $125), and they send a technician. If the item can't be repaired, they replace it.
Yes. They cover entirely different risks. Home insurance protects your home's structure from catastrophic events. A home warranty protects your budget from inevitable mechanical breakdowns.
Consider the math. The average home warranty costs $400 to $600 per year. A single HVAC replacement runs $5,000 to $12,000. One major breakdown pays for several years of warranty coverage.
Home warranties make the most sense for homes with older systems and appliances — typically homes that are 5 years old or more. First-time homebuyers also benefit significantly because they often inherit systems with unknown maintenance histories.