Home Insurance vs Home Warranty — What's the Difference?
New homeowners often confuse home insurance with home warranties — or think they overlap. They don't. Home insurance protects against sudden, unexpected damage (fire, storms, theft). A home warranty is a service contract that covers repair or replacement of home systems and appliances when they break down from normal wear. You need one. Whether you need the other depends on your home's age and your financial cushion.
Estimate your homeowners insurance premium with the Homeowners Insurance Calculator.
Side-by-Side Comparison
| Feature | Homeowners Insurance | Home Warranty |
|---|---|---|
| What it is | Insurance policy | Service contract |
| What it covers | Sudden damage (fire, wind, theft, liability) | Mechanical breakdown of systems/appliances |
| Required? | Yes (by mortgage lenders) | No |
| Average cost | $1,900/year | $400–$700/year |
| Deductible/service fee | $1,000–$2,500 per claim | $75–$125 per service call |
| Covers HVAC breakdown? | No | Yes |
| Covers roof from hail? | Yes | No |
| Covers old water heater? | No (wear and tear) | Yes |
| Covers theft? | Yes | No |
The simplest way to remember: insurance = disaster protection, warranty = maintenance protection.
What Home Warranties Typically Cover
| Covered Systems | Covered Appliances |
|---|---|
| HVAC (heating/cooling) | Refrigerator |
| Plumbing (pipes, fixtures) | Dishwasher |
| Electrical (wiring, panels) | Washer/dryer |
| Water heater | Oven/range |
| Garage door opener | Built-in microwave |
Most basic plans cover systems only ($300–$450/year). Combination plans that include appliances run $500–$700/year. Premium add-ons for pool equipment, septic systems, or well pumps cost extra.
Is a Home Warranty Worth It?
The math only works if you use it:
| Scenario | Annual Cost | Likely Repairs | Worth It? |
|---|---|---|---|
| New home (under 5 years) | $500 | Minimal — most items under manufacturer warranty | Usually no |
| Home 5–15 years old | $500 | HVAC tune-up, water heater, appliance issues | Maybe |
| Older home (15+ years) | $500 | HVAC replacement ($5K+), plumbing issues | Often yes |
| Handy homeowner with savings | $500 | Can DIY or negotiate directly with contractors | Usually no |
The average home warranty claim payout is $700–$1,200. If you use the warranty once per year for a significant repair, the $500 annual cost plus $100 service fee is a good deal. If your home is newer and nothing breaks, you've spent $500 for peace of mind you didn't need.
Common Home Warranty Complaints
Before buying, be aware of what frustrates most warranty holders:
- Claim denials. Warranties often exclude "pre-existing conditions" or improper maintenance. If your HVAC fails and the warranty company argues you didn't maintain it properly, the claim gets denied.
- Contractor quality. The warranty company chooses the contractor, not you. Quality is inconsistent.
- Coverage caps. Many warranties cap payouts per item (e.g., $1,500 for HVAC). If your system needs a $5,000 replacement, you pay the difference.
- Slow response times. Some companies take days to dispatch a technician, which is a problem for urgent issues like a broken water heater in winter.
If you do buy a warranty, read reviews specifically about claim experiences, not just price. American Home Shield, Choice Home Warranty, and Select Home Warranty are among the largest providers.
For understanding what your homeowners insurance actually covers, see What Does Homeowners Insurance Cover?. For reducing your insurance premium, check How to Lower Homeowners Insurance Premiums. And for cost data by state, see Average Home Insurance Cost by State 2026.
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