Homeowners Insurance VS Home Warranties

Their names are similar, but homeowners’ insurance and home warranties have different purposes. A homeowners’ insurance policy typically protects a homeowner from financial losses if a home is subject to unexpected events such as fire, theft or a storm. On the other hand, a home warranty covers the repair or replacement of major home systems or appliances that break down due to normal wear and tear.

Below, we answer some often-asked questions regarding these two products that are essential for homeowners to understand.

What is a home warranty?

A home warranty plan is a form of service contract. When a plan-holder encounters a problem covered by the home warranty, the plan-holder contracts the warranty company and makes a service claim, then the warranty company arranges for a service professional to visit the home and make the covered repair. If the repair falls within the plan’s coverage limit, the plan-holder will not need to pay out of their own pocket (except for deductibles or service fees, if they apply). A warranty can provide a homeowner with protection for a variety of systems, appliances, and service lines — from heating and cooling systems to water and sewer service lines, and from the refrigerator to the electrical system to the plumbing system.

Home warranty plans help alleviate the frustration, anxiety and expense that homeowners can face when unexpected breakdowns occur in the home, such as with an HVAC system, water heater, and other major home systems and appliances.

What is a homeowners’ insurance?

Homeowners insurance covers a homeowner against financial losses that they could face if unexpected events occur. Examples of issues covered by typical homeowners’ insurance policies include damage from hailstorms, tornadoes, strong winds, water damage from heavy rains and other natural causes, plus fire damage or theft or vandalism to a home’s structure. These policies likely also include coverage in case someone is injured while visiting or performing work at your home. If a covered problem occurs at your home, you file an insurance claim with the company.

With homeowners’ insurance, you pay an annual premium to keep the policy current. The premium varies by provider and what coverage is included. If a problem is covered under the policy, the homeowner will need to pay the amount of their “deductible” (if there is one) for the claim before the insurance company will provide any payment to get the issue taken care of. The dollar amount for a deductible varies by policy. Generally, the lower the deductible, the higher the cost for the policy’s annual premium. It works the other way, too — opting for a higher deductible would result in lower annual premiums.

Mortgage lenders often require buyers to have homeowners’ insurance coverage. This helps protect the lender from financial loss should something unexpected happen to the home. This is often required for both existing and brand new homes.

Is a home warranty the same as homeowners’ insurance?

No, a home warranty is not the same as your home insurance policy. Think about the things in a home that can and do wear out — the air conditioning system, heating system, appliances, plumbing, utility service lines, and other major systems and service lines. The homeowner expects them to malfunction and wear out or break down at some point, but the timing is unknown. These are the types of expenses and repairs for which a home warranty can be beneficial. A home warranty provides the homeowner with coverage for the repair or replacement of essential home systems, lines and appliances when they fail due to normal wear and tear.

Homeowners’ insurance, however, protects covers damage to your personal property from unforeseen events that could cause damage to a home and belongings — events such as a fire or a storm, or instances of theft and vandalism. These events are not expected, but they could happen. If they do, the homeowner could face large financial implications to cover the loss. Homeowners’ insurance protects a person financially and helps to get repairs or reconstruction moving.

What does a home warranty cover?

Home warranties cover things like service lines, appliances, heating and cooling systems, plumbing and more. If, for example, a homeowner has a home warranty plan for kitchen appliances and the home’s refrigerator stops working, the homeowner would contact the home warranty company to tell them about the problem, and then the warranty company would take care of finding and scheduling a service technician to come to the home. The service technician would investigate the problem, determine the steps needed for a repair, and then make the repair.

For more information about home warranties, see our page What Do Home Warranties Cover?

How much does a home warranty cost?

The cost for a home warranty can vary depending on a variety of factors. Some home warranty companies sell warranty plans for individual lines, systems or appliances that can be found throughout a home, and a plan can start as little just $4 or $5 per month. Many companies also offer bundled warranty coverages — packages that combine coverage for multiple home components into one grouping, often at savings compared to purchasing the included coverages individually. Coverage bundles will cost more, sometimes $600 to $1,000+ per year, but their more comprehensive protection helps many homeowners have peace of mind and not worry about what may go wrong.

Some home warranty companies also charge a service fee ($50 or $100, for example) to have a service technician come to a customer’s home. The customer will pay this fee directly to the service professional who comes to assess and potentially repair the problem.

Who could benefit from having a home warranty?

Any homeowner or person responsible for the upkeep of a home could benefit from having a home warranty. Many people like the idea of paying a small monthly fee for the security of knowing that potentially large, unexpected expenses will be covered when something goes wrong.  

What do I do if I’m enrolled in a home warranty plan and need to file a claim?

Let the warranty company know when you need to file a claim for a covered problem. Many companies have customer service departments with phones that are answered 24 hours a day, 7 days a week. The customer service representative assisting you will ask some questions and find a local service provider to help you. If the problem is creating an emergency (e.g., no heat in the winter, or no water service in the home), then you will likely move to the top of the priority list and a technician will be sent as soon as possible.

Many companies also have ways for customers to file claims via their website or on the customer’s smartphone. The customer can choose whichever method is most convenient for them.

Will I have to pay trip charges or service fees if I have a home warranty?

That depends on the warranty company and plan(s) you choose. Some home warranty companies do not add any charges to have a service technician visit a customer’s home for a service call. And some home warranty companies do add trip charges or service fees — for some or all of their warranty plan offerings — for a customer to have a visit from a service technician. Depending on the company, customers may have the option to pay lower monthly or annual rates for a warranty plan if they agree to pay a higher trip charge/service fee when they need to make a claim and have a technician make a service visit to their home.

Can I get a home warranty even if my house isn’t new?

Yes, home warranties are typically available for houses of all ages. In fact, a home warranty enrollment is often included or negotiated into the purchase agreement for a house, so the home buyer can have peace of mind when they move into a home for which they don’t know the history. Some home warranty companies may have age restrictions on the home appliances and systems they cover, and other companies have no such restrictions. If you’re considering purchasing a home warranty plan, do the research to ensure that it will cover your particular needs and situation.

Can I get a home warranty for old appliances?

Yes, appliances of any age, make and model are eligible for coverage by a home warranty, but such coverage may not be available with every home warranty company. So if you have a refrigerator, oven/range, dishwasher, microwave oven, clothes washer, or clothes dryer and you’d like to get them covered, do research prior to enrolling, and look to see if there are limitations or exclusions that may apply in your circumstance. When enrolling in a warranty plan, be sure you read the fine print so you know what covered items come with the coverage. Also, it’s wise to check if there are any add-ons to the warranty coverage, such as for microwaves, dishwashers, washers/dryers, and more.

Do I already have a home warranty?

If you’re unsure whether you have a home protection warranty to cover appliances and service lines, check your records, mail and email for communications from a warranty company. You might look for confirmation or welcome materials, renewal notices, or terms-and-conditions documentation. You can also look at your bank and credit card records to see if you have been charged for a warranty program, which may be billed monthly or annually.

If you recently purchased a home, check your purchase documents or contact your real estate company to inquire if a home warranty was included with your home purchase.

Sometimes people are invited to enroll in home warranty programs when they establish their utility services at a new address, so perhaps you enrolled this way and forgot.

If you are unable to use these steps to confirm whether you have home warranty coverage, you can reach out to the home warranty companies in your area and provide them with your name and address to see if there is a warranty plan in place for you. Warranty companies do their best to make homeownership as easy and stress-free as possible!