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What's the Difference Between a Home Warranty and Homeowners Insurance?

Published: September 2015

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.


What's Covered by a Home Warranty?

A home warranty may help cover the repair or replacement of a broken appliance. Home warranties 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 home warranties may also cover plumbing or electrical work.

What's not covered in a home warranty? 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.

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Home warranties aren'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 the home warranty policy is "never required."

What Does Homeowners Insurance Cover?

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 policy helps protect the physical structure of a home as well as your personal property from covered events (also known as perils) 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 provide protection if, for example, you're found legally responsible after a visitor is injured at your home.

It's important to note that coverage limits will always apply. A local insurance agent 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.To learn what your homeowners insurance policy may help protect — and what it may not — talk with your local insurance agent.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2015 Allstate Insurance Company, Northbrook, IL.

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