Home warranties and home insurance are two distinct types of coverage that each mitigate the risk of homeownership through comprehensive plans. While the two are similar, a home warranty and home insurance policy protect your home in different ways. In this article, we’ll differentiate between home warranty and homeowners insurance plans and explain how both can help protect your home.
What Is a Home Warranty?
A home warranty, also known as a residential service contract, covers the expensive repair or replacement costs associated with a major system or appliance failure. For example, if your home’s air conditioning system or dishwasher breaks due to normal wear and tear, your home warranty provider will schedule a repair or replacement with a local technician and get your covered item fixed.
When a covered item fails, you can submit a service request online or by phone in most cases. Once your claims request is processed, your provider will send a vetted service technician to your home to evaluate the issue. Some home warranty providers even allow you to select your own contractor for repairs or replacements.
Typically dispatched within 48 hours, your technician will come to your house to evaluate your issue and either repair or replace your broken item. You’ll pay your technician the agreed-upon service fee, which acts as a deductible, that is detailed in your home warranty contract. Most service fees range from $65.36–$76.38.
What Does a Home Warranty Cover?
A home warranty covers common household appliances and systems. While some providers offer coverage plans that cover both systems and appliances, many separate coverage into systems-only plans, appliance-only plans, and combination plans. In addition to appliance and system coverage, many home warranty companies offer optional add-ons for specialty items throughout the home, such as your pool and sump pump.
Below are lists of common appliances and systems covered under home warranty plans, along with some popular choices for additional coverage.
Common appliances covered:
- Built-in microwave
- Clothes washer and dryer
- Garbage disposal
Common systems covered:
- Air conditioning
- Water heater
- Garbage disposal
Additional coverage items:
- Pool/Spa equipment
- Well pump
- Sump pump
- Septic tank
- Roof-leak coverage
Who Should Buy a Home Warranty?
While home warranties aren’t necessary, they provide a useful layer of protection for your home’s essential systems and appliances. For example, if the manufacturer’s warranty on each of your appliances expires, a home warranty can offer protection and replace the expired coverage.
Additionally, homeowners who have limited emergency funds may find a home warranty useful. It offers protection against expensive repairs and replacements in the event of an appliance or system breakdown. Furthermore, a home warranty prevents you from needing to search for reliable contractors on your own, as most home warranty providers use a list of vetted service technicians.
Home warranties are also discussed during the home buying process. Many home buyers will ask the seller for a home warranty to cover the appliances and systems within the new home. This gives the new home buyer peace of mind that they won’t incur unexpected repair or replacement expenses early on into homeownership.
What Is Home Insurance?
Home insurance policies protect your home from covered perils and you from liability in the event of someone getting hurt on your property. Additionally, home insurance policies protect you if you damage someone else’s property.
Like home warranty companies, a home insurance company processes claims online or by phone. For your claim to be approved, it must be caused by a covered peril, such as the following:
- Frozen plumbing
- Fire and lightning
- Falling objects
- Civil commotion
- Sudden and accidental tearing apart, cracking, burning, or bulging
Once your claim is approved, you pay a set deductible and talk to your assigned insurance agent about next steps.
What Does Home Insurance Cover?
Most home insurance policies contain six areas of coverage. Here’s a quick overview of each one:
- Dwelling—Dwelling coverage protects your home and its structures, including interior walls, exterior walls, foundations, and cabinetry.
- Coverage for other structures—This covers detached structures on your property, including garages, fences, and sheds.
- Personal property coverage—This type of coverage protects items within your home from covered damages. It usually pays for the depreciated value of the damaged item or pays to replace it with a new item.
- Loss of use coverage—Loss of use coverage pays for living expenses if you experience a disaster that damages your home and you need to relocate temporarily.
- Liability coverage—If you’re responsible for an accident that causes bodily injury or you damage someone else’s property, this covers the costs.
- Coverage for medical payments to others—This covers the cost of medical bills if someone is injured on your property.
Many home insurance providers offer endorsements to complete your coverage. Popular endorsements include protection against identity theft expenses, earthquakes, and water backup.
Both home warranties and home insurance policies are great ways to protect your home, each offering unique benefits and coverages. Here’s a chart comparing the cost and details of the two types of coverage.
Comparison of Home Warranty vs. Home Insurance
|Comparison||Home Warranty||Home Insurance|
|Comparison||Home Warranty||Home Insurance|
|Coverage||Repairs and replacements to major systems and appliances, such as your air conditioning, refrigerator, and dishwasher||Dwelling, other structures, personal property, loss of use, liability, and medical payments to others|
|Average yearly cost||$300–$600||$1,249|
|Average cost of service fee||$65–$125||N/A|
|Average length of contract||One year (though some companies offer multi-year contracts)||One year|
|Required?||No||Not required by law, but required by most mortgage lenders|
Our Recommendations for Home Warranties and Home Insurance
A home warranty plan from a trusted provider can help give you peace of mind that your appliance or system will be taken care of in the event of a breakdown. Keep reading to learn more about several top home warranty companies and our recommendation for the best homeowners insurance company.
Home Warranty Recommendations
American Home Shield
American Home Shield (AHS) offers the best home warranty coverage. As a veteran in the industry, this provider has been serving homeowners for more than 50 years. AHS offers three comprehensive plans and allows customers to choose between a $75, $100, or $125 service fee, with a higher deductible raising the monthly plan cost. AHS also offers coverage throughout the continental United States and Hawaii. (It is not available in Alaska.)
Choice Home Warranty
Choice Home Warranty (CHW) stands out as a provider that prioritizes affordable coverage for both systems and appliances. It offers two combination plans—the Basic Plan and Total Plan—and doesn’t restrict coverage based on the age of your home or appliances. Additionally, CHW has a generous 90-day repair guarantee and free cancellation within 30 days.
Select Home Warranty
Select Home Warranty offers plans as low as $41 per month, which is in line with the industry average of $38.73–$63.16 per month. This provider also offers two free months of coverage for homeowners who sign up for a plan and free roof-leak coverage, which isn’t offered by most home warranty companies. Additionally, Select Home Warranty is available in 46 states, excluding Nevada, New York, Washington, and Wisconsin, and offers discounts on multi-year plans.
Home Insurance Recommendation
If you’re looking for a top home insurance provider, we recommend Lemonade. Although this company is new to the home insurance industry, it has created a unique insurance experience. For example, the company allows individual endorsements on items like bikes and cameras while allowing you to set the amount of coverage for each item.
Frequently Asked Questions About Home Warranties and Home Insurance
How long do home warranties last?
Most home warranties last for a year, though some companies, such as America’s 1st Choice Home Club, allow homeowners to enroll in multi-year plans for a reduced yearly rate.
What isn’t covered by a homeowners insurance policy?
While homeowners insurance is comprehensive, it doesn’t cover everything. Below is a list of common items or events that aren’t covered by a typical homeowners insurance policy:
- Natural disasters
- Ordinance or law
- Nuclear hazard
- Intentional loss
- Governmental action
- Mischievous acts
- Flood damage
- Pest control
Who offers the cheapest homeowners insurance?
Amica, Lemonade, and Travelers gave us some of the most affordable home insurance quotes, priced below the national average of $101 per month.
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