When you’re new to homeownership, you deal with unexpected twists and turns. The process of buying a house, the challenges that come with moving, and the stress on your family leave you with plenty to figure out.

That’s where homeowners insurance and home warranties come in. Both provide peace of mind when you need it most. But what’s the difference between the two? And do you need both? We’ll reveal the differences between homeowners insurance and a home warranty plan so you can understand the coverage you need. We’ll also explain why it’s a good idea to supplement homeowners insurance with a home warranty plan from First American.

Read more: What Is a First American Home Warranty?

What Does Home Insurance Cover?

Homeowners insurance provides protection for your home and belongings in case of incidents like fire, severe weather, vandalism, accidents, and more. While not required by law, it is required by mortgage companies — so if you’re still paying off your home, you almost certainly have a homeowners insurance policy. This cost is often included, with your monthly mortgage payment.

A homeowners insurance policy typically covers:

The structure of your home (repair or rebuild costs up to your policy limits)
Other stand-alone structures (like a detached garage or shed, for example)
Personal possessions (furniture, clothing, etc.)
Liability protection (if someone is injured on your property)

Illustration of a home burning, being vandalized, and experiencing a natural disaster

What Doesn’t a Homeowners Insurance Policy Cover?

Homeowners insurance has limitations and may not cover damage from earthquakes, flooding, or hurricanes. Unlike a home warranty, home insurance typically doesn’t cover your household systems and appliances when they fail — like your air conditioner breaking due to age, a fridge that stops working from normal wear and tear, or a backed-up pipe.

What Does a Home Warranty Cover?

A home warranty is there to protect you from expenses related to the repair and replacement of covered home systems and appliances. While homeowners insurance can be a lifesaver in catastrophic situations, a home warranty helps with common expenses like replacing or repairing household appliances and systems you use every day.

Home repairs can be costly, and suddenly needing to replace an appliance or home system like your furnace or air conditioner can be a huge hit to your budget. With a First American home warranty, you simply place a service request, online or by phone, when covered items break down, saving time, hassle, and potentially thousands of dollars.

Illustration of malfunctioning home appliances

What Doesn’t a Home Warranty Cover?

Typically, home warranties don’t cover cosmetic issues or damage caused by misuse or neglect of your appliances or systems. They normally don’t cover home modifications or changes needed when new, replacement equipment gets installed (though some companies may offer additional coverage for this), and some may not cover preexisting conditions.

It’s always a good idea to read through your home warranty contract carefully to understand the terms, conditions, and limitations. As long as your systems and appliances are in working condition at the beginning of your contract, and you use them as intended, a home warranty can be a great protection resource.

What Are the Differences Between Home Insurance vs. Home Warranty?

While homeowners insurance and home warranty coverage can both benefit your family, neither is enough to fully protect your household on its own. Here are some of the biggest differences between homeowners insurance vs. home warranty:

Homeowners Insurance	Home Warranty
Typically required by mortgage lenders.	Optional purchase for added budget protection.
Covers damages to your home and its contents from major accidents, fire, theft, etc.	Covers major home system and appliance breakdowns.
Helps pay for repairs to your home or personal property.	Takes care of repairs and replacement of covered items.
You pay a deductible before your insurer will cover the remaining expenses.	You pay a service fee for each claim.
Provides personal liability coverage for injuries occurring on your property.	Provides budget protection from expensive repair and replacement costs.

A good way to think about the difference between home insurance vs. warranty coverage is that homeowners insurance covers situations that may happen, while home warranties cover situations that will inevitably happen. Modern home systems and appliances have a limited lifespan and will fail over time due to normal wear and tear. Eventually, you’ll need to repair or replace your clothes washer and dryer, refrigerator, kitchen appliances, and perhaps even your HVAC system, electrical, or plumbing system. That’s where home warranties prove themselves invaluable.

Home Warranty and Homeowners Insurance Work Best Together

While both home warranties and homeowners insurance protect your home (and your bank account), they do so in very different ways. Homeowners insurance is an easy choice for most homeowners because it’s required by most mortgage companies to get a home loan. A home warranty, on the other hand, protects your covered systems, appliances, and budget from costly repairs that happen over time when you own a home.

Making sure you have both homeowners insurance and a home warranty offers the broadest protection for your home and budget and is a great way to get the most complete coverage. If you’re lucky, you’ll never need to file a homeowners insurance claim, but you’ll almost certainly encounter appliance and system breakdowns. Having home warranty coverage in your back pocket can potentially save you thousands in unexpected repair and replacement expenses.

Why Choose a First American Home Warranty?

First American home warranties are backed by nearly 40 years of experience, providing industry-leading coverage and superior value. Our network of prescreened technicians is ready to help, so you can rest easy knowing your covered appliances and systems are protected.

We offer plans to fit every budget, and coverage options to protect your home and finances. Find the right plan for you by getting a quote today.