What's the difference between home warranty and homeowners insurance?

A home warranty and homeowners insurance may both cover your home, but each offers distinct protection. Learn more about what you need as a homeowner. (iStock)

Have you ever wondered what the difference is between a home warranty and homeowners insurance? Although they both offer homeowners protection from various out-of-pocket expenses, the two offer different types of coverage.

Owning a home isn’t cheap — even without your monthly mortgage. Homeownership requires ongoing home maintenance and sometimes extensive repairs or replacements. According to HomeAdvisor, the average homeowner can pay between $1,185 and $5,056 to restore or repair water damage.

Depending on what needs to be repaired or replaced, a home warranty or homeowners insurance may help provide that protection. If you’re looking for homeowners insurance, visit Credible to compare different insurance providers and plans.

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

The two may seem similar, but home warranties and homeowners insurance offer distinct types of home protection.

A home warranty is a service contract that protects your home’s appliances and systems through discounted repair and replacement services. It’s more like a precautionary measure against pricey and unforeseen home repairs.

While a home warranty is entirely optional, homeowners insurance is required with most mortgage lenders before taking out a home loan. Home insurance is property insurance that protects the home’s structure and the homeowner’s personal property from loss or damage caused by a natural disaster, theft, or accident.

Searching for the best home insurance policies? Explore pricing and find the right home insurance plan​ that fits your needs on Credible.

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What does homeowners insurance cover?

It is essential to understand your homeowners insurance policy and what it covers. Each coverage is insured up to a limit on your policy declarations page. A standard homeowners insurance policy includes:

1. Coverage for home structure

If your home is damaged by a covered peril, the policy will pay to repair or rebuild the home. Insurance policies generally cover other structures not attached to the house such as a garage or tool sheds.

2. Coverage for personal belongings

This includes the damage to the homeowner’s personal property from theft or destruction from insured disasters.

3. Liability protection

Liability protection covers homeowners against lawsuits for injury or property damage that you, your family, or your pets cause to other people. No-fault medical coverage is also included. This covers the medical expenses of a guest injured on your property.

4. Additional living expenses

This pays for the costs of living away from home if your house is uninhabitable due to an insured disaster. This coverage includes hotel bills, meals, and other living expenses.

Getting the right insurance policy for you not only protects your home, it protects your budget while offering peace of mind. Visit Credible now to start comparing home insurance companies and get free quotes.

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How much does homeowners insurance cost?

The cost of homeowners insurance varies widely depending on your home, where you live, coverage amount, and your insurer. According to the most recent data from the National Association of Insurance Commissioners, the average annual homeowners insurance premium is $1,211. Your annual fee also depends on the age and rebuild value of the home and coverage limit.

Before you make your decision, you should do some comparison shopping. Comparing home insurance quotes is important, but it can take time. With Credible's partners, ​you can eliminate the time-consuming part of your search​.

There are more ways you can lower your homeowners insurance costs. Make sure you:

  1. Raise your deductible
  2. Purchase your home and auto policies from the same insurer
  3. Improve home security and make your home disaster resistant
  4. Maintain a good credit score
  5. Stay with the same insurer and seek out discounts

Already have homeowners insurance but want to see if you can save money? You can visit Credible to compare home insurance companies and policies.

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What does a home warranty cover?

Although the coverage limit varies by home warranty companies and offered plans, a home warranty covers appliances and essential home systems, such as your HVAC system. Here are some appliances and systems that home warranty plans typically cover:

Appliances:

  • Air conditioning
  • Refrigerator
  • Dishwasher
  • Trash compactors
  • Oven, range, and cooktop
  • Built-in microwave
  • Washing machine and dryer
  • Garage door opener
  • Freestanding ice makers
  • Pool and spa equipment (optional)

Systems:

  • Air conditioning system
  • HVAC system
  • Heating system
  • Electrical system
  • Plumbing system 
  • Water heater
  • Garbage disposal
  • Ductwork
  • Smoke detectors
  • Ceiling fans

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Is it worth having a home warranty?

While it may seem like purchasing a home warranty is a gamble, home repairs are expensive.

A homeowner typically pays a yearly premium to the home warranty company between $300 and $600 and some warranty providers charge a trade service call fee, anywhere between $50 to $100 per visit depending on the home warranty contract, whenever their contracted technician is sent to the home.

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Next steps

When you’re searching for homeowners insurance and trying to decide whether to purchase a home warranty plan, make sure you do your homework. Research companies, look over their contracts and compare annual fees.

Want to save money and give yourself peace of mind? Head over to Credible, who can help you compare insurance providers and give you free quotes in just two minutes.

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