The Difference Between Homeowners Insurance and a Home Warranty


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Both help protect your finances, but each serves a different purpose. 

First-time homeowners often ask, “What’s the difference between a homeowners insurance policy and a home warranty?” While both products provide financial protection, they serve two different purposes. Let’s take closer look at each.

The primary difference
A typical homeowners insurance policy covers losses to your home or personal property from damage or theft. For example, if a tree falls on your house you’d turn to your insurance company to cover repairs, minus what you elected as a deductible. Additionally, homeowners insurance provides liability coverage in case someone injured at your home files a lawsuit against you.

A home warranty is a contract for service in case an appliance or one of your home’s systems, such as HVAC, electrical or plumbing, needs repair. The company issuing the warranty provides repairs and replacements according to their terms of service. This often includes a service fee, typically between $75 – $125, for each incident and utilizes a service company approved by the warranty company.

Both products can shield homeowners from unexpected expenses. The level of benefits received under each depends on the particular policy or contract. The more financial protection you want, the higher the premium or contract price.

Are both necessary?
If you have a mortgage, the lender will most certainly require that you carry homeowners insurance to cover the value of the property. Even if your home is completely paid off, it’s wise to have homeowners insurance to protect your financial well-being in case of unplanned events like fire, windstorms or theft.

A home warranty is optional. Some home sellers will include a warranty to provide homebuyers with peace of mind. Often homebuyers opt to pay for a home warranty themselves, because they’re unsure if a home has been properly maintained or if they prefer the convenience of having access to the providers who are approved by the warranty company. Explore these five questions from Consumer Reports to help decide if buying a home warranty is right for you.

Consumers member perks
As a Consumers member, you have access to a discount on homeowners insurance through our partner, Nulty Insurance. Bundle your home, auto, life and umbrella policies and you’ll save even more

Consumers helps thousands of members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.

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Consumers home loans

We’d love to help you with a mortgage or home equity line of credit.

Learn more

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