Home Insurance VS Home Warranty | What’s the Difference?

Home Insurance VS Home Warranty | What’s the Difference?

When you are looking to buy your first home, some of the terms used might be confusing. If you have ever mixed up home insurance and home warranties, this isn’t too surprising as they have similarities.

Home Insurance VS Home Warranty | What's the Difference?

Let’s look at both of these terms so that they are no longer a source of confusion, and you can better understand if you need them when buying a home.

What is Homeowners Insurance?

Homeowners insurance covers losses to a private residence and the items contained within the home. It also offers liability coverage for accidents that happen on the property.

What is Homeowners Insurance?What Does Homeowners Insurance Cover?
This type of insurance normally covers four situations on the property:

  • Exterior damage
  • Interior damage
  • Loss or damage to possessions
  • Injuries that happen on the property

If any claims are made for these reasons, the homeowner will have to pay a deductible. This out-of-pocket expense could make up a large proportion of the overall cost of repair and could make claims on the insurance policy not worthwhile.

With a higher deductible, your insurance premiums will be lower, but this could mean you are responsible for thousands of dollars if you need to claim. There is also a limited liability to the coverage offered through the policy, often set at $100,000.

Lenders and Homeowners Insurance
When you are obtaining a mortgage to help you buy your home, the lender will want proof that you have a homeowners insurance policy. If you don’t have this, they will normally get one for you, and this might cost you more.

Your insurance premiums will be added to your mortgage payments, if you escrow, so that you pay toward the homeowners insurance monthly. These payments are added to an escrow account and paid out by the lender when the homeowners insurance bill is due. This makes these insurance premiums easier to cover, as you aren’t faced with a huge bill, and you don’t have to worry about missing the payment date.

This ensures that premiums won’t be missed and that the insurance coverage remains valid. Since the lender effectively owns a large part of the home, they don’t want to risk their investment should serious damage happen to an uninsured property.

What is a Home Warranty?

What is a Home Warranty?A home warranty is a contract that covers the maintenance of home appliances and other systems. This runs for a set amount of time, allowing the homeowner to have appliances repaired or replaced under the warranty.

When something goes wrong in the home, and if it is covered by the warranty, the homeowner can claim on this warranty.

The warranty company is normally partnered with providers who will assess the repairs required. They will provide a report to the warranty company, then the repair can be authorized and work completed by the provider. If a repair isn’t possible, a replacement should be provided.

A home warranty plan or residential service contract will usually cover items including:

  • Stoves
  • Refrigerators
  • Washing Machine
  • Dryer
  • Water heaters

Sometimes the warranty will also cover plumbing, electrical, and HVAC systems. If you have a home warranty, you need to be sure what it covers and what isn’t included. The small print in the contract will reveal what protection is offered, and what you might need additional coverage for.

If you have a swimming pool or spa, this could require an additional premium on top of what you are already paying. But you might find your warranty company doesn’t cover these items at all.

Homeowners Insurance Vs a Home Warranty

Homeowners insurance and warranties are similar in some ways, but shouldn’t be confused. Both of them require homeowners to pay premiums and sometimes make claims. But the home warranty covers household systems that can wear out and break, whereas homeowners insurance covers the home and items within it should they be damaged. The insurance also offers coverage to protect the owner should someone be injured inside or outside the home.

You don’t need to have a warranty when getting a mortgage, but you will need homeowners insurance before your lender will approve your home loan.

Homeowners insurance premiums are normally included in your monthly mortgage payments. While the premiums aren’t due monthly, this money goes into an escrow account to ensure the premiums are paid when they are due. The lender requires this as they don’t want to risk their investment in your home should something go wrong.

On the flipside, home warranty premiums are usually do up front but some companies may offer a payment plan.

Popular Home Insurance & Home Warranty Questions:

Do I need a home warranty if I have homeowners insurance?

While a home warranty is never required purchasing one is always an option. As explained, homeowners insurance and home warranties are very different. One covers damage that occurs to your home but it doesn’t cover things like equipment, which is why having both may be wise.

Popular Home Insurance and Home Warranty QuestionsIs a home warranty required at closing?

If you are buying a home you might be wondering if a home warranty is required at closing and the answer is no, it is not.

While home insurance is usually required if you’re obtaining a mortgage a home warranty is not, but it is something you can purchase at any time.

Homeowners insurance vs home insurance, is there a difference?

No, homeowners insurance and home insurance are one and the same.

Is home warranty worth it?

In some cases, a home warranty might be worth every penny and in other cases, it could be a waste of money. There are many things to consider trying to determine if a home warranty is worth it.

Who is the home warranty company and how is their rating? What does the plan cover? What’s the age of your appliances? How much does it cost? Is there a deductible?

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About the Author

Top Wellington Realtor, Michelle Gibson, wrote: “Home Insurance VS Home Warranty | What’s the Difference?”

Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.

Areas of service include WellingtonLake WorthRoyal Palm BeachBoynton BeachWest Palm Beach, Loxahatchee, Greenacres, and more.

Home Insurance VS Home Warranty | What’s the Difference?


Michelle Gibson Wellington Florida REALTORMichelle Gibson of the Hansen Real Estate Group Inc is a full-time REALTOR who has been specializing in Wellington Florida real estate since 2001. This veteran of the real estate industry has expertise in technology, marketing, and social media.


Hansen Real Estate Group Inc. is a full-service real estate brokerage specializing in residential real estate. As a customer-focused, quality organization, we achieve success one client at a time. Call 561-333-0446 or e-mail me today at [email protected].

Michelle Gibson and Hansen Real Estate Group Inc fully support the principles of the Fair Housing Act and the Equal Opportunity Act. Accessibility Statement


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