Home warranty vs. home insurance: A guide for homebuyers

What you’ll learn:

— Understanding home warranties and what they cover

— Exploring homeowners insurance and why it matters

— Comparing the key differences between warranties and insurance

— Deciding whether to get one or both

Home warranties and homeowners insurance share the same basic goal: protecting homeowners from unexpected costs when something goes wrong. While they complement each other, they serve different purposes. 

Understanding both is essential since they determine the loan terms you qualify for and help you plan your budget accordingly.

This guide explains the key differences between home warranties versus home insurance, helping you make the right choice.

What’s the difference between a home warranty and home insurance?

Because of their similarities, it’s natural for first-time homebuyers to ask: “Is a home warranty the same as home insurance?” The short answer is no. While both protect you from costly repairs when something goes wrong with your home, they vary in important ways.

Here’s a quick reference summarizing the main differences between home insurance and home warranties at a glance:

Like car warranties and insurance, home coverage comes in two types. A home warranty handles repairs or replacements for systems and appliances that fail with normal use, such as a broken dishwasher or faulty HVAC. Home insurance, on the other hand, protects against unexpected events like fires, theft, or natural disasters.

What's a home warranty?

A home warranty is a service contract, not a form of insurance. It covers the cost of repairing or replacing certain home systems and major appliances. Each plan has its own specific rules and exclusions, so it’s important to read the fine print.

Unlike homeowners insurance, a home warranty isn’t required to purchase a home. 

What common items are typically covered by a home warranty?

Home warranties usually cover a broad range of appliances and systems, such as:

— Plumbing

— Electrical

— Water heaters

— Dishwashers

— Ovens

— Refrigerators

— Washing machines and dryers

Many plans cover at least these items, and some allow you to pay extra for optional add-ons, like pools, spas, and septic systems.

...in as little as 3 minutes – no credit impact

What isn’t covered by home warranties?

Your home warranty won’t cover everything. Common exclusions include:

— Structural problems

— Cosmetic issues

— Preexisting conditions

— Misuse or poor maintenance

— Loss from natural disasters

— Harm caused by pets or pests

How do home warranty claims work?

Using your home warranty coverage is straightforward. Say your heating system conks out in the middle of winter. You report the issue and schedule a service request online. The home warranty company will then send a technician to diagnose the problem. If your contract covers the appliance or system, they’ll repair or replace it, depending on the severity of the issue.

How much does a home warranty cost?

There are two main fees: monthly payments and flat service fees for technician visits. Monthly payments average $30–$90, while service fees tend to fall between $75–$150 per visit. Pricing varies by provider, location, and level of coverage. 

Home warranty plans come with coverage limits, too. If a repair or replacement exceeds this limit, you pay the difference out of pocket. For example, if your washing machine repair costs $1,200 and your coverage limit is $1,000, you’ll be on the hook for the remaining $200.

What's homeowners insurance?

Home insurance policies focus on unexpected events that can damage your home or belongings. If a pipe bursts or a storm damages your roof, for example, your insurance policy helps cover repair or replacement costs. Many policies also pay for additional living expenses if an event makes your home temporarily uninhabitable.

Since lenders typically require homeowners insurance, you might wonder, “Do I still need a home warranty if I have home insurance?” The answer depends on how much coverage you want. Home warranties are always optional and serve a different purpose, focusing on fixes for systems and appliances that wear out over time.

What common items are typically covered by homeowners insurance?

Homeowners insurance covers many different property-related issues, including:

— Dwelling coverage: If your home is damaged from events like fire, wind, or lightning, dwelling coverage will pay to repair or rebuild the structure. Vandalism and theft are typically included as well.

— Personal property coverage: This protects your belongings if they’re damaged, destroyed, or stolen.

— Additional living expenses coverage: If a covered event makes your home uninhabitable, you won’t have to worry about expenses like hotel stays and meals.

— Liability coverage: This covers medical costs if a visitor is injured on your property and legal costs if they sue.

What doesn’t homeowners insurance cover?

Homeowners insurance covers a lot, but not everything. Standard policies usually exclude:

— Normal wear and tear

— Intentional damage

— Earthquakes

— Floods

— Pests

How do homeowners insurance claims work?

Using your home insurance policy isn’t much more complicated than a home warranty plan. Imagine your roof leaks after a heavy storm. You contact your provider to file a claim, and they send an adjuster to assess the damage. If they approve the claim, the provider pays for the repairs, minus your deductible.

How much does a homeowners insurance policy cost?

It averages $176 a month in the U.S., but different factors can influence the cost of home insurance.

Location, for instance, plays a big role. If you live in a high-cost-of-living area or a region prone to natural disasters, your premiums are likely higher. Properties also have different rebuilding costs. This is the estimated amount to rebuild your home if a covered incident makes it uninhabitable. Higher rebuilding costs typically mean higher premiums.

Claims history matters, too. Like car insurance, if you’ve filed several claims in recent years, insurers may consider you a riskier policyholder and charge more.

Should you buy both a home warranty and homeowners insurance?

Your lender requires homeowners insurance to close on your new home, so that choice is straightforward. The bigger question is whether adding home warranty insurance makes sense.

Ultimately, the decision depends on your finances and comfort with risk, as well as the age and condition of your appliances and systems. If most of your appliances are older and you plan to replace them soon, you might skip the warranty. If they’re newer, costly, or hold sentimental value, a home warranty can help protect your investment.

While choosing coverage takes some thought, picking a mortgage provider doesn’t have to be. Better offers transparent costs and free resources like our mortgage calculator so you can confidently plan ahead.

...in as little as 3 minutes – no credit impact

When does it make sense to have both?

Insurance covers major unexpected events, while a warranty handles repairs or replacements for home components that wear out over time. Together, they provide layered protection for your property and its belongings, giving homebuyers extra peace of mind.

Better’s online platform shows all homebuying costs up front, so you can move in ready to protect your home from day one.

Become a homeowner the easy way with Better

Homeowners insurance and home warranty policies both offer protection and reassurance, but in different ways. Whether you should purchase both depends on your unique needs, budget, and risk tolerance.

If you need more guidance, Better can help. Our team will offer you homeowners insurance that meets your coverage requirements and ensure all documents are ready for a smooth closing. With Better, you can feel confident that both your property and your mortgage are taken care of.

Apply today to start your homebuying process right.

...in as little as 3 minutes – no credit impact