Home Warranty vs Homeowners Insurance: What's the Difference?

When you’re getting ready to buy a new home, one of the most important things to ask yourself is: Do I have the coverage that I need? 

Often, when you’re shopping for home coverage, you’ll see two options come up: A home warranty and home insurance. While both have their merits, when you’re comparing a home warranty vs home insurance, remember that they aren’t the same. 

While most everyone needs homeowner’s insurance, deciding on a home warranty isn’t always cut and dry. Here’s what you need to know to compare the two and make the best choice: 

Home Warranties vs Home Insurance

What Does a Home Warranty Cover?

When Should You Get a Home Warranty

When Should You Get Home Insurance

Home Warranties vs Home Insurance

Buying a home is a major investment, and it’s only natural to want to make sure that your investment is protected. Both home warranties and homeowner’s insurance policies offer protection for your home, but there are some major differences: 

One of the major changes between renting and owning is that when you own, you’re responsible for repairing and replacing essential household appliances and systems when they fail. Home warranties offer a budget-friendly way to prepare for any repairs that your home might need. When you purchase a home warranty, you’ll pay a monthly premium for a service contract that allows you to have repairs done if most of your major appliances or home systems stop working due to age or wear and tear. Home warranties are not a required purchase, but they can be very useful.

Homeowner’s insurance policies offer protection against unexpected situations that may damage your home and/or your belongings. This includes damage to your home’s interior or exterior, your fence, other structures on your property, and belongings indoors. These insurance policies cover a wide range of situations, including damage due to fire, some weather events, theft, and vandalism. In most cases, you will be required to purchase a homeowner’s insurance policy before a bank will issue a mortgage on your home.

What Does a Home Warranty Cover?

Home warranties are offered in one-year service contracts. They typically cover most of the major systems within your home, such as your HVAC system, hot water heaters, plumbing, and electrical systems. A standard home warranty may also cover major appliances such as washers, dryers, refrigerators, and stoves. You may also be able to add additional coverage to your plan for other large systems such as a swimming pool and spa machinery. 

Your home warranty may also have rules regarding how an item will be repaired or replaced. This could include requiring a specific company to complete a repair. There may also be restrictions regarding items that are covered under a manufacturer’s warranty.

If you’re moving into a newly built home, the builder may offer a warranty with limited coverage on workmanship and materials for some components of your home. This may include your home’s major systems, as well as windows, siding, doors, drywall, and even major structural components such as the roof.

When Should You Get a Home Warranty

A home warranty is an attractive option for recent homebuyers or those who are in the process of buying because it can provide peace of mind after you’ve likely put a good chunk of your savings into buying your home. While it is an additional expense, the amount you would pay to a home warranty company is likely much less than it would cost to cover home repairs out of your own pocket.

If you’re buying a home that someone else has already lived in, you’ll want to evaluate your home inspection to determine the condition of the home’s appliances and systems. If the home inspection finds that some of the systems might need to be replaced soon, a home warranty could come in handy. In some cases, a motivated seller might even purchase a home warranty to make a home more attractive to you, the buyer.

If you’re buying a newly built home, you should look into whether the builder is offering a home warranty and what it covers. But no matter what type of home you buy, if you’re the type of person that doesn’t mind paying money now to give you peace of mind later, a home warranty could be a good idea.

When Should You Get Home Insurance

Anybody who is a homeowner should have a home insurance policy. Unless you’re buying your home outright, your lender is most likely going to require you to show proof of your policy before your mortgage can be issued. While the hope is that you’ll never need to use it, a homeowner’s insurance policy is crucial. Not only can it help repair or replace items that are damaged or stolen, but it can also help you get back on your feet if you lose your home entirely due to a fire or other covered disaster.

When purchasing a homeowner’s insurance policy, be sure to review the policy documents to make sure that all of your belongings are covered. In some cases, it may be a good idea to purchase an extended coverage endorsement to protect your home against situations that aren’t included in a standard homeowner’s insurance policy. The first step to finding the best homeowner’s insurance policy for your home is getting a quote. From there, you can review your options and decide whether additional coverage is something that you need.

Not sure how much home insurance you need? Our licensed agents will assist you with determining coverage limits and assessing any additional features you may want to purchase. We want you to get the most out of it and be protected against any unexpected events and financial problems. Sign up here to find the best homeowners insurance for you!