What a home warranty pays for, and what home insurance does

Despite the shared word "home", a home warranty and homeowners insurance are different products. What's sold as a home warranty is really a service contract. It helps cover the cost when major items like appliances or air conditioning break. Homeowners insurance pays for damage from covered events, such as a fire or a storm. A home warranty doesn't overlap with or replace a homeowners policy.

What a home warranty pays for

A home warranty covers the breakdown of individual parts of a home, such as the electrical and plumbing systems, and some plans cover appliances. It doesn't cover the home's structure. These contracts last for a set amount of time and cost extra, unlike a builder's or a product's own warranty, which usually comes included.

A homeowners policy isn't a maintenance contract, and it doesn't pay to repair things that simply wear out.

What homeowners insurance pays for

A homeowners policy pays for damage from covered events, major ones such as a wildfire among them. It also covers your belongings, your living costs while the house can't be lived in, and your liability to others.

The fees and limits in a warranty

The cost of a home warranty is more than its price. You may also pay a deductible or a fee each time something is serviced, and the contract states that service fee.

Home warranties have exclusions and limits. Read the exclusions and the dollar limits, including any limit on what you can be reimbursed and whether accidental damage is covered. Check which appliances or systems are excluded, and any restrictions or fees to cancel.

An annotated example

What to do next

If you have a home warranty, find the contract and read it carefully. Write down the fee for each service call, the date it ends, and the appliances and systems it excludes. Keep it with the house records, next to the homeowners policy, so the right one is clear when something breaks.