What’s the Difference Between Home Insurance and Home Warranty Coverage?

Home warranties are a popular investment for buyers and sellers in real estate transactions, but they also have a lot of utility for time-strapped or budget-conscious homeowners. In some circles, home insurance and home warranty coverage may seem interchangeable, but they’re not. They are distinctly separate policies that step in for different circumstances. 

Home warranties and home insurance both provide financial protection when you have issues, but they otherwise have little in common. If you already have insurance, you can purchase a home warranty without worrying about paying for redundant coverage. 

Keep reading to learn more about home insurance and how home warranties can be a natural complement. 

What is Home Insurance?

Home insurance is a policy to protect your home and belongings from damage that occurs in certain circumstances. There isn’t a legal precedent for home’ insurance, but mortgage lenders typically require it for all properties to protect their investment if damaged before you pay it off.

While the terms of insurance policies vary, standard coverage protects your main dwelling, other structures on your property, and your personal belongings. They can also cover liability for damage to someone else’s property or injuries on your property. Home insurance is inherently restrictive, though. Many policies apply exclusively to named perils or circumstances explicitly outlined in your terms. 

Standard insurance policies cover damage or losses sustained by the following things:

• Fire
• Lightning
• Wind
• Hail
• Theft
• Vandalism

Some policies provide coverage in the event of an earthquake, flood, or other natural event, but they usually cost extra. After an event, you can file a claim for structural or personal property damage, but home insurance won’t help out if an interior component of your home is damaged due to wear and tear. 

Home Warranty: What Does It Cover?

That’s where home warranties come in. When your everyday appliances and systems, such as dishwasher, garage door opener, HVAC unit, or electrical system malfunction due to routine use, you can file a home warranty claim. Like home insurance, you’ll pay a deductible, also known as a trade call or service call fee, for a licensed contractor to assess, diagnose, repair, or replace your malfunctioning item. 

However, a home warranty isn’t an insurance policy in the strictest sense of the word. It’s more appropriately described as a service contract.

Unlike insurance, a home warranty doesn’t usually cover the home’s structure. Instead, it provides coverage for home systems and appliances. A typical home warranty can cover the following:

• Plumbing, electrical, and HVAC
• Refrigerators
• Washers and dryers
• Dishwashers
• Ovens, cooktops, and ranges
• Septic systems
• Electronics
• Sprinkler systems
• Water softeners

The above list is far from exhaustive. With Liberty Home Guard, we have optional add-ons for pool and spa equipment, carpet cleaning, re-keying, pest control, and more. 

What Is a Home Warranty?

In simple terms, a home warranty is a service contract to maintain, repair, and potentially replace critical home appliances and systems. Homeowners may purchase coverage themselves from a home warranty company, but it is also common for home sellers or realtors to transfer a policy to a home’s new owners.

A home warranty provides a level of home protection that a home insurance policy does not. A dishwasher leaking water on the floor; a refrigerator on the fritz; a faulty light switch—these are the kinds of problems that a home warranty can resolve. Home insurance, on the other hand, does not cover individual appliances or system components that fail due to age or general wear and tear. This is the important difference between home warranty and insurance coverage.

A home warranty is meant to save homeowners money and insure against the high costs of inevitable home repairs. With the right plan, you will spend less on coverage than you would have spent paying for home repairs out of pocket.

Home Insurance vs. Home Warranty

A home warranty provides additional protection that a home insurance policy does not. A dishwasher leaking water on the floor, a refrigerator on the fritz, a faulty light switch: these problems that a home warranty can resolve. 

Home insurance, on the other hand, doesn’t cover individual appliances or system components that fail due to age or general wear and tear. Instead, it repairs or replaces structural components or personal property lost due to a covered event.

A home warranty is meant to save homeowners money on inevitable home repairs. With the right plan, you will spend less on coverage than you would have spent paying for home repairs out of pocket.

How to Choose Between Home Insurance and a Home Warranty

A home warranty was never meant to replace home insurance. Because the policies have different uses and forms of coverage, they are natural complements.

Home insurance covers your home and belongings in the event of theft, natural disaster, or other calamity. A home warranty covers specific home appliances and system components and can provide some home services, such as pest control or gutter cleaning.

Think of it this way: If your washing machine malfunctions and requires a repairperson, you would file a claim with your home warranty provider. If a tree falls on your home and crushes your washing machine, you file a claim with your insurance company. These policies are meant to complement each other, not compete.

Home Warranty Vs. Appliance Warranty

While navigating the home warranty and general service contract market, you may also come across appliance warranties. Many appliances, large or small, have a manufacturer’s warranty. These can last anywhere from a couple of months to several years. They are essentially a company’s guarantee that their product will work properly for a certain amount of time. Sometimes, “appliance warranty” may actually refer to the manufacturer’s warranty.

Once the manufacturer’s warranty expires, you can get an extended home warranty from a third party. Manufacturer’s warranties apply to single items, whereas home warranties cover a bundle of systems and appliances, so it can ultimately offer more comprehensive protection. 

Where Can I Purchase Home Warranty Coverage?

A home warranty can be purchased online, by phone, or as part of a real estate translation. Buyers of a new home may inherit a policy from the home’s previous owners. It is also possible to receive a home warranty as a gift from a real estate agent when a home’s sale is finalized. In these cases, homeowners usually receive one year of coverage. If they want to extend their coverage beyond that year, they can request a new contract from their warranty provider.  

Homeowners can also purchase a policy directly from a home warranty provider like Liberty Home Guard. Our website provides an overview of our plans and policies, plus additional customizations for your home size and location. 

Get Comprehensive Coverage With Liberty Home Guard

Once you know your ideal coverage level, request a free quote through our website or talk with a team member. If you have any lingering questions about the differences between home warranties and home insurance or want to further investigate getting a home warranty to fully protect your personal property, you can speak with our team at (833)-543-8683 or request a custom quote online.