Home warranties vs. home insurance: Do you need both?

Home warranties and home insurance: What are the differences, and do you need both?

Home warranties are service contracts that cover repairing or replacing household systems and appliances, like your water heater or oven. However, home warranties are not the same as home insurance, which doesn't cover breakdown or wear and tear.

Last updated: Sep 25, 2026

What does a home warranty cover?

A home warranty covers repairs or replacement of covered home systems and appliances that break down from normal wear and tear or malfunction, such as a water heater or oven.

According to the NHSCA, a basic home services contract usually covers the following:

Ductwork
Dishwasher
Electrical system
Garage door opener
Garbage disposal
Heating system
Interior plumbing
Oven, stove and range
Water heater

However, policies do differ, so read the fine print to see what's covered.

Home warranties vs. home insurance

Home insurance covers losses due to sudden, unexpected events, such as a catastrophic storm or theft. Your lender usually requires you to purchase this type of insurance. On the other hand, home warranties are optional and cover failures that happen because of wear and tear.

"It's essentially the opposite of insurance, but they can be complementary," says Chartrand.

Service companies are required to be licensed, Chartrand says. Businesses in all 50 states must follow consumer protection laws, and legislation is often administered by a state's insurance department, he says.

Home insurance	Home warranty
Covers sudden and accidental damage from events such as fire, theft and storms.	Covers repairs or replacement of covered systems and appliances that break down from normal wear and tear.
Covers your entire home, belongings and liability	Covers only the systems and appliances listed in the service contract.
Does not cover normal wear and tear or age-related breakdowns.	Covers breakdowns caused by normal wear and tear.
Required by mortgage lenders.	Optional.
You pay a deductible when you file a covered claim.	You pay a service fee when you request a covered repair.

A home warranty service contract is also not the same thing as a homebuilder's warranty, which covers new construction, Bach says. That warranty comes with a new home -- the homebuilder offers a guarantee on the workmanship of the property and its systems.

With those protections in place, you probably don't need a service contract, she adds.

On the other hand, if your home and its appliances are older, they are more likely to break down, Chartrand says. A service contract covers repair costs if the equipment fails, which could save you hundreds of dollars, he says.

Bach agrees that a service contract may make sense on an older home. If you buy a service contract, you'll also have access to a pre-qualified list of repair people "who may give you better service than what you'd get by finding someone out of the phone book," Bach says.

"The repair guy wants to keep the home warranty company happy," she says.

Home service contracts can also give you an edge if you're trying to sell your property. If you can offer potential buyers the remainder of your home warranty, it could make your house more attractive, Chartrand says.

Are home warranties worth it?

A home warranty may be worth it if you have a home that is likely to see some major systems break down in the near future. A warranty does not guarantee that every repair or replacement will be covered.

There are downsides to home warranties, too. They include:

The cost. A basic service contract costs between $350 and $500 per year, according to the NHSCA. In addition, when a claim is made, there is usually a service charge per call of about $35 to $100.
Excluded systems. Many systems and appliances aren't protected under a basic warranty. According to the NHSCA, the air conditioning unit, refrigerator, washer and dryer are usually optional items that would need to be added on to a basic contract in order to be covered.
Other exclusions. Warranties typically do not cover pre-existing conditions – failures determined to have been present before the start of the contract. It may be difficult to pinpoint when a failure occurred, so the homeowner may not know for sure that an item won't be covered until the service call.
Limitations on who does repairs. Home warranties may limit your choices for what companies or service people do the repairs. You may not be able to select your preferred service.

Bach adds that if you do choose a home warranty, anything that's not listed in the contract wouldn't be covered. It's important to read the documentation carefully before signing any type of agreement, she says.

FAQs: Home warranty and home insurance

Can a home warranty replace homeowners insurance?

No. A home warranty covers certain systems and appliances if they break down during the service contract period. Homeowners insurance covers sudden and accidental damage from covered events and also provides liability coverage. A home warranty does not protect your home against risks such as fire, theft, or storms.

Does homeowners insurance cover normal wear and tear?

No. Homeowners insurance does not cover normal wear and tear, aging, or routine maintenance. If your plumbing, HVAC system or appliance breaks down because of age or regular use, you pay for the repair yourself unless another type of coverage applies.