Home warranty versus home insurance

Family unpacking moving boxes


What is the point of a home warranty? For most people, the largest investment you and your family will ever make is in your home. It’s the center of your family’s life, the site of countless celebrations, sorrows, memories and routines, and you want to be sure you protect it from daily wear and tear and major damage. However, the truth is that your homeowners insurance policy doesn’t cover everything, even though with a name like that, we couldn’t fault you for thinking it might.


Bridging the coverage gap

This isn’t Medicare. However, there’s still a coverage gap we need to address— the gap between what your homeowners insurance covers and what you need to keep your home running smoothly and comfortably if one of your many major systems or appliances needs service. A home warranty picks up this coverage gap where your homeowners policy falls short — and it can be a very expensive gap.


Full coverage means getting both

The coverage gap illustrates why it’s essential to invest in both a homeowners policy and a home warranty. Together, they offer comprehensive coverage for your family’s largest asset, but why do you need both plans? What does each plan cover? What’s the difference between them? Read on and find out. We designed this guide to help make the reasons you need both and the differences between them obvious and apparent, especially for new homeowners.


What do homeowners insurance policies cover?

The first major difference between a homeowners insurance policy and a home warranty is that homeowners insurance is usually mandatory, and a warranty plan is not. Before issuing you a mortgage, a bank usually requires you to purchase a standard homeowners policy and retain it throughout the life of the mortgage. This insurance policy protects you from big-picture issues and unexpected perils ranging from theft of property to major damage brought on by fires, floods or other natural disasters. Homeowners insurance covers four primary areas of your home, including the personal property that could be stolen or damaged, the interior and exterior of your home, and the general liability coverage if and when someone is injured on your property.

How are homeowners insurance claims paid?

In the (hopefully) unlikely event that your basement floods after a big storm or an earthquake damages the structure of your home, an insurance adjuster would come to your house to assess the damage and fill out a claim. After the claim is approved, the insurance company would calculate the cost of the total repair, subtract your deductible amount, and then issue you a payment to cover the costs. It’s imperative to protect your house from these major disasters, but what about the more common failures incurred by daily wear and tear of the appliances and systems in your home? These are the essential systems (like heat, air conditioning, water and electricity) and appliances (like your refrigerator, washer, dryer, oven, stove, dishwasher and more) you rely on 24 hours a day and seven days a week. They make sure your home is running smoothly and all its inhabitants are happy, healthy, clean, well-fed and comfortable. That’s where a homeowners warranty plan comes in — it covers all these things, none of which are protected by a homeowners insurance policy.


What do home warranty plans cover?

Home warranties generally cover failures incurred from daily wear and tear to your home’s major appliances and systems, typically including items like refrigerators, dishwashers, ranges, ovens, microwaves, washers, dryers, garbage disposals. It also includes other built-in appliances, water heaters, HVAC systems, and other heating or cooling systems, plumbing and electrical systems, and smart-home system integrations. Other aspects of your home that a more customized home warranty could also cover, perhaps through add-ons, include septic systems, sprinkler systems, telephone systems, roofs and foundations, fireplaces and chimneys, attics and exhaust fans, water softeners, water/sump pumps, garage doors, spas, wells, pools and more.

Differences between home warranties

Each home warranty plan will vary according to the company offering it and the coverage options it’s designed to offer, The list above should give you a good idea of what aspects are generally eligible for coverage, and which additional items you can sometimes add to your home warranty coverage specifics. If you don’t see something listed that you’re wondering about, you can always ask. Reputable home warranty companies  offer a wide range of a la carte items that can provide complete coverage to customers who have unique or unusual systems and appliances. Always know what you’re signing and how much coverage you’re paying for, and be aware of any exceptions that may apply to your contract.

Extra confidence for first-time homebuyers

The importance of home warranties is especially apparent for first-time homebuyers who are under even more financial strain when purchasing their first house than someone who is upgrading to their next home. A little extra confidence and peace of mind about what is often an already overwhelming, anxiety-producing decision can go a long way for a first-time homebuyer. Not being hit hard financially for repairs and replacement of major home systems and appliances right out of the gate into home ownership is a welcome sigh of relief. Home warranty coverage not only fills the gaps in coverage left by your homeowners insurance policy, but it also protects you from unpredictable costs of appliance repair or replacement.

How are home warranty claims paid?

Here’s how it works. To purchase a home warranty, after deciding on the home warranty provider you’d like to deal with, you’ll sign a service contract that usually lasts about a year, just as you would for an insurance policy. Your warranty company will often let you choose whether you’d prefer to pay the annual sum upfront or pay in small monthly installments. When a covered item breaks, you pay a one-time service fee (or deductible) for a qualified service provider to come to your home to fix the problem.

Once you request service, the qualified service partner will assess the damages and either repair or replace your equipment or appliance. Suppose you’ve elected to go with Cinch. In that case, after the experienced, carefully vetted technician fixes the issue at your home and you pay your service fee, you’ll receive an unparalleled, industry-leading 180-day workmanship guarantee. Cinch will stand by the repair for six months or come back and fix it at no additional cost.

What is the difference between home insurance and a home warranty?

The main difference between a home warranty (or home protection plan) and a homeowners insurance policy is what each covers. Homeowners insurance is often mandatory when new homeowners buy a home. The bank will usually require you to purchase a homeowners insurance policy before issuing a mortgage and expect you to keep the policy for the length of the mortgage. A home warranty, however, is optional. It’s a calculation you’ll need to make for yourself. You can decide whether you’d prefer to pay for any of your home’s major systems and appliance repairs and replacements out of pocket as they occur or have a predictable, affordable monthly payment that protects your savings and credit rating.

Home/homeowners insurance

Homeowners insurance, also known as home insurance, covers four primary areas of the home, including personal property that could be stolen or damaged, the interior and exterior of your home, and general liability that occurs if someone were to be injured on your property. In addition to theft, home insurance policies will cover costs for damages caused by perils like fires, floods and other natural disasters. You need an insurance policy to cover costs if your home ever undergoes serious water, wind or fire damage from a natural disaster.

Weather and disaster coverage

If your basement were to flood due to a storm, or a fire or an earthquake were to ruin the structure of your home, an insurance adjuster would come to your property and fill out a claim for any damaged belongings that you could claim. Most insurers insist on documentation, so it’s a good idea to photograph, describe and value all the items in your home that you’d need to claim in the event of a natural (or unnatural) disaster (or accident). After the insurer approves your claim for the loss of your belongings, the insurance company will issue you a payment after subtracting the amount of your deductible from the total balance to cover the cost of your loss and repair claims.

How a home warranty works

When purchasing a home warranty, you sign a service contract that usually lasts for a year, just as you would for an insurance policy, but the similarities end there. Home warranties generally cover essential home systems when they stop functioning properly due to age or frequent use, like heating, cooling, plumbing and electric, as well as major appliances like refrigerators, dishwashers, washer and dryers, water heaters and more. A home warranty covers not only repairs but also complete replacement of these essentials if and when it is required.

Shouldering the repair-or-replace burden

Water heater repair or replacement, for example, can be a major expense and could seriously throw off your monthly budget if you had to handle the entire upfront cost yourself. A home warranty company spares you that financial burden and the surprise hit to your savings or credit cards that could come with it. That’s why millions of homeowners across the country have warranty plans from companies like Cinch in addition to their homeowners insurance policy. Having both types of plans provides peace of mind, knowing your home and your family are taken care of whenever day-to-day issues or completely unexpected problems arise.


More on home warranty plans

Remember, while homeowners insurance policies are usually required by law, home warranties are never mandatory. Because homeowners insurance policies don't cover costs for damages as a result of daily wear and tear, home warranties can save you a lot of trouble and money. Most home equipment and appliances will eventually require costly repairs and replacements. In fact, a recent Consumer Reports customer survey found that 1 in 5 new household appliances will require fixing soon after being purchased.

Homeowners insurance versus home warranty: Knowing the difference

As a homeowner, it’s important to understand the differences between a home warranty and a homeowners insurance policy to ensure you’re prepared for all scenarios associated with damage to your home. A homeowners insurance policy and your home warranty work together when things go wrong. Of course, if the roof blows off your house, you’ll be in serious trouble and need to call your insurance provider immediately to help you deal with the damage and provide coverage. If your water heater suddenly goes on the fritz, it can also be extremely stressful and disturbing to your family’s busy life. A warranty company provides coverage for this kind of far-more-likely disaster that disturbs your family’s comfortable routine.

Why do I need homeowners insurance and a home warranty?

Investing in home insurance and a home warranty plan is essential because they cover different types of damage. If your roof were to start leaking and your HVAC system stopped heating in the middle of the winter, you would need an insurance policy and a home warranty to fix both of these problems and create a safe and comfortable living environment for your family. So, what are the cons of a home warranty? Very few, as it turns out. Sure, you could avoid monthly or annual payments without a home warranty, but as we’ve shown, a single, serious repair could wipe out all those gains and then some in one disastrous day — if you elect to do without home warranty coverage, that is.

How does Cinch work?

With a Cinch Home Services plan, you pay a monthly fee for our services. You set the price, and it can range from $45 to $65 per month. We offer flexible home protection plans that fit your specific needs. You can choose an Appliances plan, Built-in Systems plan or Complete Home plan (which includes both), and even add additional items, such as pool or well pump coverage. Again, although homeowners insurance policies are typically required for homeowners, a home warranty plan is optional. However, because insurance policies don’t cover costs for daily wear and tear to the appliances and home systems you rely on every day and night of every week, all year long, warranty coverage can save you a lot of trouble and money while helping keep your budget on track.

Your home warranty of choice: Cinch home protection plans

Again, at Cinch, we offer home protection plans that fit your specific needs with the ability to choose an Appliance plan, Built-in Systems plan or Complete Home plan while giving you the option to cover additional items. With a Cinch plan, you pay a monthly fee for our services. When something breaks, you pay a one-time service fee (or deductible) for our service partners to come to your home to fix the problem. With our deep bench of experienced professionals, our plans cover damage incurred from daily wear and tear to your home’s appliances and major systems. Once you request service, we send one of our 14,000 qualified service pros to assess the damage and either repair or replace your equipment or appliance.

An unparalleled guarantee unique to the home warranty industry

After our professional technician fixes the issue at your home, you pay your service fee and receive our 180-day workmanship guarantee. We’ll stand by the repair for six months or come back and fix it at no additional cost. No other home warranty providers offer this level of confidence in their service providers' work as Cinch does, passing that confidence on directly to their customers. Now that you understand how home warranty vs. home insurance decisions can impact and protect your home in such a wide variety of ways, it's important as a homeowner to ensure you're prepared. These two essential plans may cover different things, but both types of coverage provide peace of mind and assurance that you, your home and your family are taken care of when even the most unexpected problems arise.


What’s the difference between insurance and warranty? Let’s consider both.