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Home Warranty vs Home Insurance: Whats The Difference?

A home is arguably the most significant asset an individual will invest in. Therefore, most homeowners will enact numerous measures to ensure the structure, those residing inside it, and the possessions of said individuals are as safe and secure as possible. 

Two such measures include home insurance and home warranties. Though both instruments can prove valuable, homeowners need to understand that there are certainly distinct differences between these two assurances. 

Home Warranty Overview

A home warranty is a service contract between a homeowner and policy provider that offers coverage for specific types of appliances or systems like various electrical units, plumbing and heating apparatuses, and possibly certain kitchen appliances. 

Policies can vary depending upon the homeowner’s needs and financial abilities. Many providers offer plans that cover appliances or entire systems. Select establishments might also offer combination policies. 

Home Insurance Overview

Home insurance policies offer protection from accidents or damage caused by unexpected events, such as occurrences precipitated by fire, weather phenomena, or other acts of God. Specifically included provisions often depend upon the homeowner’s specific needs. 

Fundamental Differences

Coverage. The major difference between each is the items covered within. In the vast majority of cases, insurance does not provide for either the repair or replacement of damaged appliances or specific systems.

Similarly, the only occasions home insurance might cover damaged appliances and systems is if the policy covers the event at the question.

Cost. Another significant difference is cost. Typically, a home insurance policy is more expensive than home warranty coverage. Events covered by home insurance are usually more costly than the appliance or system repair or replacement. 

For that reason, the home insurance provider incurs a higher degree of risk. As a result, the homeowner will pay more in premium payments.

Final Takeaway

In a perfect world, investing in both insurance and a home warranty policy would be beneficial, however, doing so could yield high costs. 

Industry insiders state, while insurance is necessary and often a requirement, specific issues should be weighed when considering the investment in a home warranty policy. If appliances are relatively new or still in good condition, a home warranty policy might not be worth the money. 

Updated on April 13, 2020

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