Do I Need A Home Warranty And Homeowners Insurance?

Do I Need A Home Warranty And Homeowners Insurance?


Home insurance and home warranties provide us with peace of mind and protection against financial harm due to something happening to our home. They differ when it comes to the type of protection they offer. Home insurance usually applies when a natural disaster strikes your house. A home warranty is involved when something mechanical fails within your home, such as an appliance or home system.

Homeowners Insurance

For those natural or man-made disasters that can cause major damage to your home and its mechanical systems, there’s home owners insurance. Unlike home warranties, homeowners insurance is generally required by your mortgage company and a policy cannot be transferred from one owner to another. It usually covers and provides payouts for events that are out of your control like freezes, tornadoes, hurricanes, fires, floods and theft. A typical insurance policy covers both the physical structure of your home and your personal belongings that are inside of it. According to the Federal Reserve Bureau, the average annual cost for homeowners insurance ranges from $300 to $1000.


If the pipes in your house burst and flood your kitchen, you would call the insurance company and file a claim. An adjuster will then come to your home and assess the damage or loss to determine how much the company will pay. Once the claim is approved, you will need to pay your deductible. Then the insurance company will issue you a payment for the rest of the cost to repair any damages due to the flood. Usually, the higher your deductible, the lower your annual premium for your insurance policy will cost. Homeowners insurance can also protect homeowners from any lawsuits involving a third party. For example, if your neighbor comes over to your house and slips and falls, breaking his or her leg and decides to sue you, your home insurance may address this claim.

When buying an insurance policy, homeowners need to research which hazards and disasters are covered and which aren’t. The installation of a new roof, storm shutters, security alarm systems, dead-bolt locks and smoke detectors may reduce the annual premium for some homeowners. The location of a home may also directly affect which types of disasters are covered on a policy. It is also important to find out if the insurance will cover living expenses in the instance where the house is completely destroyed or deemed unusable due to a fire, for example. Lastly, homeowners should research if the policy will pay the full cost of repair due to a destroyed property or just a portion.

Homeowners insurance usually covers:

  • Theft and vandalism
  • Tornadoes, hurricanes or earthquakes
  • Floods, fires, windstorms, lightning, hail or falling objects like a tree
  • Personal property
  • Liability claims from third-party injuries that take place on your property
  • Living expenses if your home is deemed uninhabitable

Home Warranty

Home service agreements, also known as home warranties, on the other hand, are optional and cover the cost of repairs or replacements for a number of home systems and appliances like refrigerators, washing machines and dryers, ovens, air conditioning, heating and plumbing. The warranty guarantees to the homeowner that if something that is covered by the home warranty plan stops working or breaks down then it will be repaired or replaced by the warranty company, subject to the terms and conditions of the contract. A home warranty is usually transferable and can be passed along from one owner to another.

If a covered major appliance or home system breaks down, like your washing machine or central heating system, you will then contact the warranty company and they will arrange for a licensed, pre-screened technician to come to your home and assess the situation. If the issue is due to normal wear and tear or mechanical failure and is covered under the terms and conditions and limits of contract then the appliance or system will be repaired or replaced and you will only have to pay a service fee. Home warranties typically cover major appliances and systems like:

  • Central air conditioning and home heating
  • Interior electrical system
  • Plumbing system
  • Water heater
  • Range/Oven/Cooktop
  • Refrigerator
  • Dishwasher
  • Washer and Dryer
  • Garage door opener
  • Ceiling fans

Benefits For Home Sellers

A home is a major investment whether you are buying your first house or selling your old one. A whole home warranty plan can be beneficial and protect assets for both buyers and sellers. Sellers can use home warranties as an extra incentive for potentials buyers. If a buyer purchases the house, they not only own the home, but they also take over the warranty for the home. Home sellers may pick up the tab of a home warranty during the first year of coverage. Having a home warranty is a competitive way for a seller to separate their listed home from others on the market. Homes with an existing home warranty plan usually sell faster than homes without one. A warranty also protects sellers from unexpected repairs of major appliances during the listing period and it reduces any pre-close issues related to the home inspection during the home buying process. Lastly, home warranties offer protection against any after-sale legal disputes.

Benefits For Home Buyers

Buyers, especially those of older homes, often use home warranties in the event that an appliance may breakdown and need a repair within the first year or so of homeownership. For buyers, after spending a large amount of money on their home, they receive protection for their appliances, as well as repairs and replacements for older home systems. Many homeowners are on a budget after purchasing a home so a home warranty protects the money they have left over by covering unexpected repair costs that may arise. Home warranties are also convenient for home buyers. Calling a reputable warranty company that provides a network of licensed and pre-screened professionals instead of finding a repairman yourself is easier, saves time and eliminates the risk of hiring an inexperienced repairman to work on your home.


As a homeowner, dealing with major appliances breaking down is inevitable. Whether you are buying a new appliance or need to insure an old one, a home warranty can be a smart investment in any circumstance. With the Earth’s climate drastically changing, the occurrence of natural disasters is becoming more frequent and unpredictable. Homeowners insurance not only protects you against natural disasters, theft and vandalism, but it also offers liability insurance in the event that someone gets injured on your property. Purchasing both a home warranty from American Residential Warranty and homeowners insurance will cover your home, belongings, appliances and mechanical systems and save you hundreds on out-of-pockets costs in the event of unexpected breakdowns or catastrophic natural events.

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