Home warranty vs. home insurance: what's the difference?
Home insurance pays for sudden damage from events like a fire, a storm or a burglary. A home warranty is a service contract that pays to repair or replace home systems and appliances, such as your furnace or dishwasher, when they break down from normal wear. They cover different things, so one doesn't replace the other, and your mortgage lender requires insurance, not a warranty.
Published by Marcus L. Barber, former licensed Maryland property and casualty producer (2010–2012)Reviewed by Marcus L. Barber on Updated This guide is general education, not advice for your situation. We're an independent publisher, not an insurer or agent, and we may earn a commission from partner links. How we make money.
Key points
- Insurance covers sudden, accidental damage. A warranty covers mechanical breakdown and wear and tear, which insurance excludes.
- Home warranties often aren't regulated as insurance. Depending on the state, the regulator may be the insurance department or another agency.
- Regulators warn that warranties carry exclusions, service fees and dollar caps, and that claims for pre-existing conditions are often denied.
- A warranty may make sense for an older home with aging appliances and no repair savings; it adds little for a new home still under a builder's warranty.
The difference at a glance
| Home insurance | Home warranty | |
|---|---|---|
| What it pays for | Sudden, accidental damage from fire, wind, hail, theft and other covered causes | Repair or replacement of covered systems and appliances that break down |
| Wear and tear | Excluded | The main thing it covers |
| The structure of the home | Covered | Not covered |
| Your belongings | Covered | Not covered |
| Liability if someone is hurt | Covered | Not covered |
| Required by a mortgage lender | Generally yes | No |
| Regulated as insurance | Yes | Depends on the state |
What home insurance covers
The Consumer Financial Protection Bureau describes homeowners insurance as paying for losses and damage to your property if something unexpected happens, like a fire or burglary. It also covers your belongings and your liability. The CFPB notes that lenders generally require proof of homeowners insurance. For the details, seethe parts of a homeowners policy.
What insurance won't cover is things that simply wear out or break down: an old furnace that dies, a roof at the end of its life, a dishwasher that stops draining. That's the gap a home warranty is sold to fill.
What a home warranty covers
The National Association of Insurance Commissioners (NAIC) says a home warranty covers the mechanical breakdown of parts of a home. It doesn't cover the home's structure, may or may not cover appliances depending on the plan, and lasts a set term, such as one year. California's insurance department adds that warranties cover wear and tear, deterioration, or defects that existed when you bought the home.
Plans commonly cover systems like heating, air conditioning, plumbing and electrical, and appliances like the water heater, dishwasher and oven. Pools, roofs and second refrigerators are often extra or excluded.
A breakdown and the damage it causes are treated differently. If your water heater fails and floods the basement, a warranty may pay for the heater while homeowners insurance generally covers the sudden water damage. Our sister site Home Water Damage Help explainswhat to do after a basement floods andwhat to do when an AC unit leaks inside.
Who regulates home warranties
The NAIC warns that home warranties might not be regulated as insurance in your state. A few examples of how states handle them:
- California: the Department of Insurance licenses and regulates home warranty companies as "home protection" companies.
- Texas: the Texas Department of Licensing and Regulation licenses residential service companies and runs an ombudsman for claim delays and denials.
- Florida: the Office of Insurance Regulation issues home warranty licenses.
Before you buy, check that the company is licensed in your state if your state requires it.
Fine print to check
California's insurance department says all home warranties contain dozens of exclusions. Federal Trade Commission and state guidance suggest asking:
- What's the service fee? Most plans charge a fee each time a technician comes out, on top of the yearly price.
- What's excluded? Look for specific systems, parts and causes the plan won't cover.
- Are there dollar caps? Many plans limit what they'll pay per item or per year.
- What about pre-existing conditions? Texas regulators suggest asking whether a pre-existing condition voids coverage, and how the company decides.
- Can you cancel, and is there a fee?
- Does it duplicate coverage you already have, such as a builder's or manufacturer's warranty?
As the FTC puts it, a home warranty is only as good as the company responsible for coverage.
Is a home warranty worth it?
No regulator tracks typical warranty prices or payouts, so this comes down to your situation. In our view:
- It may be worth it if your home's major systems and appliances are older, you'd struggle to cover a sudden repair, and you've read the contract and the caps are reasonable.
- It's often not worth it if the home is new and under a builder's warranty, your appliances are under manufacturer warranties, or you have an emergency fund that could cover a repair. Setting aside the yearly cost in savings is an alternative.
Either way, a warranty is never a substitute for homeowners insurance.
If a claim is denied
Ask for the denial and the contract provision it's based on in writing. If you can't resolve it with the company, file a complaint with the regulator that licenses home warranties in your state, often the insurance department, or with your state attorney general. States do act: in 2026, for example, Arizona's attorney general announced an $11.8 million settlement with a home warranty company over allegations that it misrepresented coverage and left out exclusions in sales calls; the company didn't admit wrongdoing.
Common questions
Is a home warranty the same as homeowners insurance?
No. Homeowners insurance pays for damage from sudden events like fire, wind or theft. A home warranty pays for repairs to systems and appliances that fail from normal use. California's insurance department says a warranty is not insurance and does not replace a homeowners policy.
Do I need a home warranty if I have home insurance?
You don't need one, and lenders don't require one. A warranty only fills the gap insurance leaves for wear and tear and breakdowns. Whether that's worth the cost depends on the age of your systems and appliances and whether you have savings for repairs.
Does homeowners insurance cover a broken water heater?
Usually not the water heater itself if it simply wore out. But homeowners insurance generally covers sudden water damage the failure causes to your floors and belongings. A home warranty might cover repairing or replacing the heater, within its limits.
Is a home warranty worth it?
It can be for an older home with aging systems, especially if a surprise repair bill would be hard to pay. It's often not worth it for a new home under a builder's warranty or appliances under manufacturer warranties. Read the exclusions, service fees and payout caps before buying.
How this guide was made
We drafted this guide with help from AI writing tools, working from the sources listed below. Every fact was checked against those sources, and Marcus L. Barber read and reviewed the full page, including its title, description and FAQs, before it was published. AI tools don't decide what we publish; a person does. Our editorial standards.
Sources
- A Consumer's Guide to Home Insurance, National Association of Insurance Commissioners
- Home protection contracts, California Department of Insurance
- What is homeowner's insurance? Why is homeowner's insurance required?, Consumer Financial Protection Bureau
- Consumer protection: Residential service company home warranty, Texas Department of Licensing and Regulation
- Florida Statutes 634.301: Definitions (home warranty), The Florida Senate
- Florida Statutes 634.303: License required, The Florida Senate
- So, what's the deal with home warranties?, Federal Trade Commission (MilitaryConsumer.gov)
- Attorney General Mayes announces $11.8 million settlement with Choice Home Warranty, Arizona Attorney General