Although both a home warranty and homeowners insurance help protect your home, they serve different purposes. A home warranty is optional and covers the repair or replacement of home systems like HVAC, plumbing and electrical, as well as major appliances such as refrigerators, dishwashers, etc. Homeowners insurance is typically required by lenders and offers coverage for property damage caused by fires, windstorms, lightning strikes, hail, etc.
While both policies may cover damage to similar items, the type of damage determines which one applies. For example, if your refrigerator breaks down due to normal wear and tear, it will be covered by your home warranty. However, if it’s damaged in a fire, your homeowners insurance will handle the claim.
What Does Homeowners Insurance Cover?
Homeowners insurance provides coverage for damage to your property and liability for injuries that occur to guests on your property.
There are two primary types of homeowners insurance policies: named peril and open peril (also known as all-risk). A named-peril policy covers only the specific risks listed in your policy, while an open-peril policy offers broader coverage, protecting against any event not explicitly excluded.
Homeowners insurance typically covers:
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Your home's structure and anything permanently attached to your house
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Structures that aren't permanently attached to your home
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Pays to repair or replace your belongings
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Pays for injuries or damages you or your family members cause to others
What Does a Home Warranty Cover?
Home warranties typically cover most major appliances and systems, though the type of coverage depends on the plan you choose. For an item to be eligible for coverage, it must break down due to normal wear and tear, not because of an accident or misuse. Here are the common items covered by home warranties:
Appliances:
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Dishwasher
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Oven/range/cooktop
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Refrigerator
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Clothes washer and dryer
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Built-in microwave
Systems:
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HVAC
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Plumbing
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Electrical
Add-ons:
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Pool and spa equipment
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Sump pump
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Well pump
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Central vacuum
Your home warranty contract will specify exactly what is covered, along with anything that is not. It is important to read the contract carefully to ensure you fully understand your warranty plan.
Do You Need Both?
A home warranty and homeowners insurance offer different kinds of protection, which is why many homeowners choose to have both. While neither is legally required in California, lenders usually require homeowners insurance as a condition for securing financing.
If you want to avoid unexpected out-of-pocket repair expenses, a home warranty could be a good addition to your homeowners insurance policy. However, if your home, systems and appliances are relatively new, you have an emergency fund for repairs or you're able to handle repairs on your own, you may be fine with just homeowners insurance.
To ensure you make the best choice for your home, it's important to reach out to both home insurance providers and home warranty companies to fully understand what is covered, any potential overlaps and how each option aligns with your needs.
