Home warranty vs. homeowners insurance

A home warranty and homeowners insurance are not the same thing. While it’s always necessary to purchase a homeowners insurance policy, a home warranty is rarely worth it. Instead, most experts recommend adding equipment breakdown coverage to your home insurance policy if you’re worried about the extra protection.

Home warranty vs. homeowners insurance: What’s the difference? 

Is a home warranty the same as homeowners insurance?

No, a home warranty and homeowners insurance are two different types of protection for your home. While you should always purchase home insurance, the same can’t be said for a home warranty.

This is because a home warranty only covers the appliances, HVAC systems, and plumbing of your home. Oftentimes these are already covered by their own manufacturer’s warranty or your home insurance policy itself.

Meanwhile, homeowners insurance covers the entire structure of your home, garage, sheds, and belongings from damage — plus provides loss of use, liability, and medical payments coverage to protect your assets in the event you're sued.

Home warranty vs. homeowners insurance: What they cover

A home warranty covers your home’s appliances, plumbing, and HVAC systems in the event they break down due to damage, maintenance issues, or normal wear and tear. Meanwhile, a homeowners insurance policy offers more robust coverage to protect all of your home, belongings, and assets in the event of a covered peril.

Home warranty

A home warranty covers the following appliances and built-in systems:

• Dishwasher

• Garbage disposal

• Oven, range, and stovetop

• Refrigerator

• Trash compactor

• Washer and dryer

• Plumbing

• Ductwork

• Electrical system

• Water heater

• Air conditioning system

• Heating system

• Ceiling fans

Keep in mind that not all appliances and types of repairs are included in a home warranty contract — it varies by company and the coverage tier you purchase.

Homeowners insurance

Homeowners insurance offers the following types of coverage:

• Dwelling coverage. Insures your home’s structure, built-in appliances, and roof up to the cost of replacing your home.

• Other structures coverage. Protects structures that are detached from your property such as garages, sheds, and mailboxes.

• Personal property insurance. Covers you up to your limit if your personal possessions are stolen or damaged by a covered peril.

• Loss of use coverage. Reimburses you for additional living expenses if a covered loss forces you out of your home and into a temporary living space.

• Personal liability coverage. Protects you from expensive medical and legal bills if someone is hurt or their property is damaged while at your home and you’re sued for damages.

• Medical payments coverage. Covers injuries to your houseguests, regardless of who’s at fault.

While the dwelling coverage of your home insurance policy protects your appliances in the event they’re damaged due to a covered peril, it won’t pay for damage due to normal wear and tear or mechanical breakdown the way a home warranty will. That’s why you might want to add equipment breakdown coverage to your home insurance policy as well.

Home warranty vs. homeowners insurance: How they work

While homeowners insurance offers more comprehensive coverage to your home and belongings, it doesn’t extend to normal wear and tear on your appliances. That’s where a home warranty might come in handy.

Home warranty

Home warranty companies generally offer several tiers of coverage starting with a basic warranty that provides repairs and replacements to specific parts of your home.

Enhanced coverage might extend repairs to central air, washers and dryers, and refrigerators. And then optional warranty add-ons may cover pools, septic systems, or central vacuums. The appliances and types of repairs that are covered by each tier will vary depending on which third-party vendor you purchase a home warranty from. 

When something happens to an appliance, you call your home warranty provider who will send out a service technician to investigate the problem. They’ll then either fix the problem — if it’s covered under your warranty — or let you know that it’s not covered and explain your options.

Hot tip: If you own a newer home or recently purchased any major appliances, your appliances may still be covered by their manufacturer’s warranties so you should double-check before purchasing additional protection.

Homeowners insurance 

The most popular homeowners insurance policy is an HO-3 policy, which covers damage to your home caused by any peril except those specifically excluded from your policy.

That means that your built-in appliances are covered from damage caused by any covered peril, like if a kitchen fire damages your stove or a lightning strike causes your HVAC system to stop working. 

Standard homeowners insurance does not cover mechanical breakdown, however you can often add equipment breakdown coverage to your policy to ensure your appliances are fully protected.

Equipment breakdown coverage works similarly to a home warranty when one of your appliances stops working. Your insurer usually has a team of technicians they work with that will visit your home to assess the damage and make sure it’s covered under your policy. If it is, you’re responsible for paying a deductible for the work before your insurance company kicks in to cover the rest.

Home warranty vs. homeowners insurance: How much they cost

Both home warranty and home insurance policies come with premiums you have the choice of paying monthly, quarterly, or annually. They also come with a deductible, or the amount of money you have to pay out of pocket before the company kicks in to cover the rest. However, how much bang you’re getting for your buck varies between the two types of policies.

Home warranty

The average cost of a home warranty is $900 per year, according to pricing data from HomeAdvisor. 

Most home warranties also come with a deductible, often called a service fee. This is how much you have to pay each time a technician comes out to service your home. Add to that the tips you’d pay out of pocket for each visit, and you can see why a home warranty might not be worth it.

Service fees typically range from $60 to $120, though it will vary depending on where you live and the company you work with.

Equipment breakdown coverage is very similar to a home warranty, except you can add it directly to your policy instead of getting a third-party vendor involved. And it’s relatively affordable — it may cost you just $25 to $50 per year to add $50,000 worth of equipment coverage to your policy. 

Homeowners insurance

The average cost of a homeowners insurance policy is $1,249 per year, according to the National Association of Insurance Commissioners. 

When selecting your policy, you can typically choose a deductible between $500 and $3,000. The higher your deductible, the cheaper your premiums — but the more you have to pay out of pocket before insurance kicks in to cover the rest.

Should I choose a home warranty or equipment breakdown coverage?

A robust home insurance policy — with equipment breakdown coverage added — is better protection than a home warranty. This is because it offers the same coverage at a significantly cheaper price.

Homeowners whose insurance companies don't offer equipment breakdown coverage might want to consider setting aside a certain amount each month in a fund to cover unexpected appliance repairs rather than opting for a home warranty.

Another option is to reach out to a Policygenius agent who can help you find a company that offers equipment breakdown coverage and switch policies.