A home warranty is different from homeowners insurance

A home warranty protects appliances and home systems. Just how you might purchase a warranty for your cell phone or your microwave, you can purchase a warranty for your home.

A home warranty doesn’t cover the walls and structure of your home. Rather, it covers the cost to replace or repair certain home systems — think the air conditioning, electrical systems, the HVAC, and water heaters — should they break down. In some cases, a home warranty might also cover home appliances, including those in the kitchen like microwaves and ovens.

You’ll pay either a monthly or annual fee.
Home warranties on new homes usually have coverage limits. For instance, appliances could be covered for the first year, along with paint and drywall, and the HVAC and plumbing systems could be covered for two years.

Home warranties versus homeowners insurance
A home warranty isn’t insurance — it’s a service contract. Home warranties cover maintenance issues for equipment and appliances, not structural issues. A home warranty is optional. 



Homeowners insurance is not required by state law. However, if you have a mortgage, your lender will require homeowners insurance to protect the investment. There are three components to homeowners insurance: dwelling coverage, personal property coverage, and personal liability coverage.

Homeowners insurance covers your property from damage, which is often referred to as insurance perils. A peril is an event that may damage your home or belongings. Common insurance perils include fire, lightning, theft, ice, snow, sleet, smoke, vandalism, and freezing.

If your home is damaged from a tree, fire, or hail, you can have it repaired or rebuilt under dwelling coverage. Your dwelling consists of your home and “other structures” on the property, like a garage or shed. Personal property coverage includes your furnishings and electronics. Liability coverage protects you if someone is injured on your property and sues for damages.

If your dog bites someone or someone is injured on your trampoline or swimming pool, liability coverage protects you. If your house be uninhabitable due to a covered accident, additional living expenses would cover costs to relocate.

Homeowners that live in disaster prone areas — flooding, earthquakes, tornadoes, hurricanes — will need to get add-on coverage for their homeowners insurance.

  Homeowners Insurance Home Warranty
Dwelling/Structure Yes No
Personal Liability Yes No
Personal Belongings Yes No
Loss of Use/Additional Living Expenses Yes No
High-end Electronics/Special Jewelry Limited* No
Equipment breakdown Yes**** Yes
Electrical outage Yes* No
Service lines Yes* No
Cyber liability Yes* No
Wind or hail Yes*** No
Flood No** No
Earthquake No* No
Appliance repair (AC/HVAC/water/etc) No Yes
Appliance replacement Maybe**** Yes


*Available as add-on coverage if not part of policy
**Flood insurance is available through the NFIP and approved insurers
***If you live in hurricane or tornado areas, additional windstorm rider may be required
****Only if damaged due to an insurance peril

Homeowners insurance doesn’t cover damage due to lack of proper maintenance or wear and tear. Likewise, many home warranties may have exclusions if there is improper maintenance.

A home warranty could be a great way to provide some peace of mind and save you money should an appliance or home system break down. However, you’ll want to know all the rules, exclusions, and limitations before you make a decision. Be sure to do your due diligence: ask plenty of questions beforehand, compare warranties from different companies, and read the fine print.

Ronda Lee
Founder, Editor-in-Chief
Ronda is an attorney, writer, and entrepreneur. She is a contributing writer for the Huffington Post. Originally from Chicago, she has lived in Los Angeles and New York. She loves to travel and is passionate about education equity, especially for first generation college students.