Home Warranty vs. Home Insurance: What's the Difference?

Homeowners insurance: protection from sudden disasters

Insurance pays to repair or rebuild your home and replace your belongings after a covered peril, such as a fire, a windstorm, a fallen tree, or a burst pipe. It also includes liability coverage if someone is hurt on your property. You pay a premium plus a deductible on each claim.

Home warranty: protection from breakdowns

A home warranty is a service contract. When a covered system or appliance stops working because of age or normal use, like a furnace that won't ignite or a refrigerator that stops cooling, the company sends a technician to repair or replace it. You pay a monthly or annual fee plus a service call fee per visit.

Side by side

• Burst pipe floods the kitchen: insurance covers the water damage; a warranty may cover the pipe repair itself.
• Water heater dies of old age: a warranty covers it; insurance doesn't.
• Hail damages the roof: insurance covers it; a warranty doesn't.
• Dishwasher stops draining: a warranty covers it; insurance doesn't.
• Guest slips on your steps: insurance liability coverage applies; a warranty doesn't.

Do you need both?

If you have a mortgage, you almost certainly need homeowners insurance, and it's smart protection even without one. A home warranty is a budgeting choice: helpful if your systems are aging and a surprise repair would strain your finances, unnecessary if your home is new or you have strong savings.