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

Homeowners insurance protects your home and belongings against sudden, accidental events - fire, windstorms, hail, theft, some water damage - and covers liability if someone is hurt on your property. A home warranty is a service contract that repairs or replaces covered systems and appliances when they fail from normal wear and tear.

Put simply: if a storm destroys your AC unit, that's an insurance question. If your AC unit simply wears out, that's a warranty question.

• Insurance: an annual premium plus a deductible per claim - often $500 to $2,500 or more.
• Home warranty: an annual or monthly premium plus a service call fee per visit - often $60 to $150.

That structure makes a warranty better suited to frequent small-to-mid repairs, and insurance better suited to rare, expensive events.

With insurance, you generally choose your own contractor and the insurer pays the claim. With most home warranties, the company assigns a technician from its own network; some plans let you use your own contractor with approval and reimburse you up to the plan's limits.

If you have a mortgage, homeowners insurance is almost always required. A home warranty is optional and worth considering if you have several aging systems or appliances and want predictable repair costs. Read is a home warranty worth it? to decide, then compare plans on our rankings page.

This article is general information, not legal, insurance or financial advice. Coverage, prices and terms vary by company, plan and state - always read the full sample contract before you buy.