Home warranty insurance vs. homeowners insurance coverage

When everything is functioning as expected, a home can offer a place for peace and relaxation. But owning a home may also require ongoing and expensive repairs, from repairing a broken appliance to replacing a damaged roof. Depending on what needs to be repaired or replaced — and why — a home insurance policy or a home warranty may help provide protection.

While home warranties and homeowners insurance policies may help cover your home, they don't offer the same types of protection. Here's a look at some of the differences.

A home warranty may help cover the repair or replacement of a broken appliance. A home warranty may also cover what the Federal Trade Commission (FTC) calls "limited coverage of workmanship and materials" for specific parts of the house in a new home. This Old House notes that a home warranty may also cover plumbing or electrical work.

What's excluded from home warranty coverage? According to the FTC, home warranties may not include components "covered under a manufacturer's warranty." If your new furnace breaks down, then you would likely have to discuss a repair with the manufacturer of your furnace system.

A home warranty isn't a blank check for repairs or replacements. According to the FTC, a home warranty may also have rules regarding how homeowners can make a claim, and might also delineate how an item, such as a furnace, will be repaired or replaced. Some warranties might specify which repair companies may complete a repair.

While a home warranty may be a worthwhile purchase for a homeowner, Michigan State University Extension notes home warranty coverage is "never required."

While a home warranty may provide coverage for an appliance that's stopped working, what happens if someone steals your belongings or your home is damaged by fire?

A typical homeowners insurance policy may help pay to repair your home or replace your personal property after a covered event (also known as a peril) such as theft or fire. However, homeowners insurance typically will not provide protection if, for instance, your air conditioner or other appliance breaks down or is defective.

Homeowners insurance typically also comes with liability coverage, which may help pay legal fees or medical bills if you're found responsible after a visitor is injured at your home.

It's important to note that coverage limits will always apply. Your insurance provider can help you determine whether you have enough protection in place should you experience a loss.

A home warranty and a homeowners insurance policy offer different types of coverage that may give you peace of mind as you consider certain scenarios.