What is the difference Between a Home Warranty and Home Insurance?

What is the difference Between a Home Warranty and Home Insurance

If you already own a house or are planning on getting one, the chances are that you will be at sea trying to figure out the difference between a home warranty and home insurance.

While home insurance and home warranty ultimately serve as a safety net for your property or investment, they offer distinct types of protection, and understanding how they both work will help you decide whether you need both of them or not.

What is a home warranty?

If you have a service contract that caters to every household repair and replacements (either of household appliances or home systems), what you have is known as a home warranty. This type of services contract is executed upon payment of an agreed monthly or annual payment which could be flat rates on the services provided. 

If your home appliances or system breaks down and you have it covered in your home warranty plan, the warranty company will send a technician to assess the situation and fix the problem. All you have to pay for is the service call fee. 

As you will expect, such contracts have coverage limits and may provide annual coverage of up to $1500 for eligible appliances. 

If you are offered a home warranty as part of a real estate contract or transaction, the home warranty kicks off immediately after you close the deal. However, if you bought a home warranty for a property you already own, you will have to wait for some days (between 15 to 30 days) before the home warranty takes effect.

What does a home warranty cover?

As we mentioned earlier, home warranties cover both new and existing (or ore-owned) home appliances and systems. Most times, home warranties come in three plans;

  • Appliance plans 
  • System plans 
  • Combination plan

The appliance plan covers items like your dishwasher, washer/dryer, and refrigerator, among other appliances you have at home.

The system plan covers your plumbing, HVAC, and electrical systems. Last but not least, the combination plan encapsulates both appliance and system plans.

Occasionally, you may run into home warranty companies that offer add-ons to their list of services. These add-ons can include pools, septic systems, lawn sprinkler systems, spas, and additional appliances like a second air conditioner or dishwasher. Mind you, these add-ons come at an extra fee. 

How much does a home warranty cost?

Depending on your payment plan, whether monthly or annual, home warranty coverage can cost between $300 to anywhere north of $1,100 annually. Then service fees ( that is, the amount you pay each time you request repairs) range from $50 to $150 per service call. And it varies from company to company. 

Here is an insider tip

While you are at it, note that the higher the monthly or annual fees, the lower the service charges and it swings the other way as well. 

What is homeowner insurance?

Homeowner insurance, which most people know simply as home insurance is classified under property insurance and is intended to safeguard the homeowner against unforeseen circumstances that may lead to the loss or damage of the property.

A typical home insurance policy covers the structure of the property or home (including gazebos, sheds, garages, and decks), personal belongings (like furniture, sports equipment, and clothes), and liability protection such as property damages and injuries caused by members of the family or their pets.

Also, home insurances cover additional living expenses such as hotel bookings, meals, and other living expenses incurred if the property becomes inhabitable and you need to move out. 

What does home insurance cover?

As we mentioned earlier, home insurance covers your home (the structure), personal belongings, and liability. Here is a list of events your home insurance covers. 

  • Explosion
  • Fire or lightning 
  • Hail or windstorm 
  • Damage caused by aircraft 
  • Vandalism/malicious mischief 
  • Theft 
  • Riot or civil commotion 
  • Volcanic eruption
  • Falling object 
  • Weight of ice, snow, or sleet

Others include overflow of water or steam from plumbing, HVAC, or fire-protective sprinkler system. Then, freezing of plumbing and accidental or sudden damage from artificially generated electrical current.


Have it at the back of your mind that standard home insurance doesn’t cover damages or losses caused by earthquakes and floods (either natural or man-made). So, it’s best to have separate insurance coverage for such events. 

While you are at, some factors you should have on your checklist when determining the cost of your home insurance include where you live, the cost of rebuilding your home, and how much you are your personal belongings worth?

Other things to consider include the size and condition of the property, your marital status, and credit score. 
Check list of homeowners here.

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