Home Warranty vs. Homeowners Insurance

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Key Takeaways

  • New homeowners may be unfamiliar with home warranties and homeowners insurance policies.
  • They both protect the homeowner if something goes wrong, but they serve different purposes.
  • Additionally, homeowners insurance has a hazard insurance component and a personal liability component.


At various stages in life, we’re faced with new things, many of which can place us in very unfamiliar territory, leaving us to feel like we have no idea where to even start asking questions. One of these unfamiliar things is the experience of becoming a new homeowner. And one of the questions you may have as you navigate homeownership is “What is a home warranty and how does it differ from homeowners insurance?”

First off, a home warranty is an option you can purchase when you buy a home. It covers things like appliances and HVAC systems. This way, a month into moving into your new home, you’re not faced with having to buy a new dishwasher or furnace. These policies cover some of the basics and provide some peace of mind that you won’t have to pay to replace expensive equipment and appliances if something breaks.

Homeowners insurance is something entirely different. It covers two types of risks: hazards and personal liability. Hazard insurance covers things like losses from a fire – should your home catch fire, resulting in a major loss, that risk is taken on by your insurance company. It’s important to note that if you have a mortgage, you won’t be allowed to close on your mortgage without homeowners insurance, as the bank wants to make sure they get their money should something happen to your home.

The personal liability side covers things like someone being injured while on your property – for instance, if your dog bites someone, or if someone slips and falls on your walkway because it’s icy. The injured person may sue you, and your personal liability policy covers up to a certain amount – $200,000, $500,000, or some other amount, depending on what you’ve purchased.

Sometimes that amount isn’t enough, which is where umbrella liability insurance comes into play. These umbrella policies cover what your homeowners or automobile policies don’t, and you can read a previous post to learn more about them.

Hopefully this helps shed some light on one aspect of homeownership, making a vast, new territory seem a little less overwhelming. Until next time, enjoy.


If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:

5 Money Changes When Buying a Home

5 Unexpected Costs When Buying a Home

Gary has provided wealth management services to clients for over 30 years. He is credentialed in financial services with practical experience in all areas of finances and money. He is the author of Changing the Conversation, Wealth of Everything, and co-author of The Business Battlefield.

He is genuinely interested in getting to know the person in front of him. Who are they? What’s most important to them? Where do they want to go in life? Whether he’s advising clients, mentoring his team, or coaching entrepreneurs, Gary is always simplifying complexity and motivating others to take the next action that’s right for them.

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