Home Warranty vs. Home Insurance

Imagine the following: You hop in the shower after a workout, only to discover that the water is ice cold. You don’t really have the money to repair your water heater, let alone replace it entirely. What can you do?

A scenario like this is where you’ll benefit from a home warranty vs. home insurance alone. While home insurance can protect you from catastrophic events, only a warranty provides coverage for repairs and normal wear and tear. 

Still, is home warranty worth it altogether? Here’s how a home warranty compares to standard homeowners insurance and how each provides a unique layer of protection to your home.

What Is the Difference Between a Home Warranty and Homeowners Insurance?

First and foremost, it’s important to understand that there is, indeed, a difference when it comes to home warranty vs. home insurance. Both provide financial coverage for your home’s appliances and household systems, but each type of coverage will apply in different situations.

What Is Home Insurance?

Homeowners’ insurance covers damage or loss due to known perils. Depending on your insurance provider, these can include fire, wind, hail, vandalism, or theft. While some home insurance policies provide the option for equipment breakdown insurance, they usually only apply to sudden electrical and mechanical failures and won’t cover normal wear-and-tear or appliance breakdowns.

What Is a Home Warranty Plan?

Is home warranty the same as home insurance? Not quite. While home insurance only kicks in for qualified events, a home warranty will cover the cost of repair or replacement of your major appliances and household systems due to regular wear and tear. 

Most insurance providers have exclusions and exceptions regarding what they won’t cover. Many homeowners, in response, purchase a home warranty plan, as it can close those gaps and provide maximum coverage for your home and its contents. Additionally, whereas home insurance is a common requirement when taking out a mortgage, a home warranty is optional. 

What Does a Home Warranty Cover?

Your home warranty will cover the cost of service, repair, and replacement of your household appliances and systems. It will also provide coverage for normal wear and tear and breakdowns, not just catastrophic events. 

A typical home warranty will cover items and systems that include:

• Major appliances (refrigerator, water heater)
• Built-in appliances (stove, dishwasher)
• Major home systems (e.g., HVAC)
• Swimming pools
• Garage door openers

Be that as it may, not all home warranty plans are created equal. It’s important for homeowners to read the fine print before committing to a home warranty policy to ensure they understand what the policy does and does not cover. 

Some policies, for instance, may extend to consumer electronics such as computers, TVs, and audio equipment. But whether yours will is something that depends on the provider and your coverage limits. Additionally, some providers will also extend your home warranty coverage to secondary structures such as a detached garage or accessory dwelling unit.

What Doesn’t a Home Warranty Cover?

Your home warranty has limits, and it’s important to understand what is not covered by your policy. On that note, home warranties do not cover:

• Structural damage to the home itself
• Natural disasters
• Consumer electronics (though some policies have this option, as mentioned)

If you have an external structure, such as a detached garage, you may need to purchase additional coverage in order for your warranty to apply. And depending on your provider, there may be portions of your home that are excluded from coverage.

What Does Home Insurance Cover?

Homeowners’ insurance is designed to protect your home and its contents from covered events, usually weather-related disasters, fires, and theft. While a home warranty covers your household appliances and systems, a home insurance policy is far more comprehensive, providing protection for your home, its structure, and the personal belongings contained therein. 

However, you must keep in mind that a home insurance policy is specifically aimed at specific covered events rather than general wear and tear. In other words, if your hot water heater breaks down, your home insurance policy will not cover it. But if your roof or siding is damaged during a hailstorm, your insurance provider will pay for the repairs.

Thus, your home insurance policy will cover items that include the following:

• Your home’s structure (e.g., siding, roof, driveway)
• Major appliances
• HVAC systems
• Swimming pools
• Consumer electronics
• Secondary structures

Additionally, while some home warranties will exclude certain sections of your home, your homeowners' insurance policy will protect your whole home during a covered event. 

Your insurance provider can also customize your insurance policy based on your unique needs and risk factors, and many homeowners can save by bundling their insurance policy with other types of insurance, such as auto coverage.

What Is Not Covered Under a Home Insurance Plan?

Are appliances covered under home insurance? Yes, but only during a covered event. And “covered events” are usually limited to things like fire, theft, or certain types of electrical damage. 

Homeowners insurance will not typically protect against such events as floods, earthquakes, or damage due to hurricanes or other high-wind events. However, if you live in an area that is particularly prone to such risks, you may be able to purchase additional insurance from your provider.

Ultimately, while an insurance policy will cover your home, structures, appliances, and even your personal belongings, you are not covered in all scenarios. 

Is It Beneficial to Have Home Insurance and a Home Warranty Plan?

At the end of the day, the answer to the question, “Is a warranty insurance?” is simple: No. The two provide different types of coverage for distinct situations. 

Still, that doesn’t mean you are left to choose between a home warranty vs. home insurance. Many homeowners discover that it helps to have both policies in place for a total home protection plan. Start by purchasing homeowners insurance, then a home warranty that will cover any gaps that your insurance policy doesn’t cover.

Given soaring consumer costs, it helps to have a warranty to cover the cost of unexpected repairs. Many consumers lack an emergency savings fund to cover unforeseen breakdowns. A home warranty can provide you greater protection for you, your home, and your budget.

Get the Protection You Need

A home warranty can provide the protection you and your family deserve. ARW Home offers warranties that fit your home as well as your budget. Contact us to learn more about your warranty options.