We’ll be the first to admit it — insurance can be confusing. If you own a home, you probably purchased home insurance because your mortgage lender required it. But a standard homeowners policy doesn’t cover everything. Big gaps remain for flood and earthquake unless you buy separate coverage, and many water-backup events require an endorsement. Since 2020, insurers have tightened terms with catastrophe-specific deductibles and roof settlement changes, so it’s essential to check details like named-storm or wind/hail percentage deductibles and whether your roof is on actual cash value (ACV) or replacement cost. In 2025, regulators are also reshaping availability and pricing: California advanced a market “Sustainable Insurance Strategy” that allows forward‑looking catastrophe modeling and ties discounts to mitigation steps like Safer from Wildfires measures (California Department of Insurance), Colorado is implementing a FAIR Plan backstop for homes that can’t find private coverage (Colorado Division of Insurance), and Florida’s Citizens continued phasing in mandatory flood insurance for more policyholders in 2025 (Citizens Property Insurance). Against this backdrop—and with the U.S. setting a record 28 billion‑dollar weather and climate disasters in 2023 (NOAA NCEI)—some homeowners layer in a home warranty and adopt prevention tech (like leak sensors) that many insurers now incentivize (Insurance Information Institute).
What does homeowners insurance cover?
A standard homeowners insurance policy — also known as an HO-3 — generally includes these core protections (Insurance Information Institute):
- Your dwelling (your home and anything attached to it)
- Other structures like fences, garages, or guest houses
- Personal property like furniture and appliances
- Liability costs and medical bills if someone is injured on your property
- Loss of use coverage to cover living expenses while your home is being repaired
But even then, an HO-3 policy will only cover those expenses under a specific set of circumstances, also known as the “16 perils.” Personal property is typically covered on a named‑peril basis, while the dwelling is often “all‑risk” except for exclusions. Key 2025 realities to verify: separate percentage deductibles for hurricanes/named storms and wind/hail (commonly 1–5% of Coverage A in exposed regions), growing use of ACV or roof age/material schedules for older roofs, and the need to add endorsements for water backup, service line, or equipment breakdown where desired (NY DFS; Texas Department of Insurance; Washington OIC; HSB/Service Line). Flood remains excluded and is typically purchased via the NFIP or a private policy—note NFIP’s standard residential limits of up to $250,000 for building and $100,000 for contents and that NFIP policies do not include Additional Living Expense (FloodSmart/NFIP). Earthquake is also generally excluded and may require a separate policy or endorsement (Washington OIC). To better protect rebuild costs, many insurers offer inflation guard, Extended Replacement Cost, or in some markets Guaranteed Replacement Cost options; for valuables, consider scheduling items to raise limits and broaden covered causes of loss (Insurance Information Institute).
- Fire or lightning
- Windstorm or hail
- Explosion
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Smoke
- Vandalism or malicious mischief
- Theft
- Volcanic eruption
- Falling object
- Weight of ice, snow, or sleet
- Discharge or overflow of water or steam from plumbing, heating, air conditioning, fire-protective sprinkler system, or household appliance
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, air conditioning, or fire-protective system
- Freezing of a plumbing, heating, air conditioning, or fire-protective system, or household appliance
- Sudden and accidental damage from artificially generated electrical current
What does a home warranty cover?
Meanwhile, a home warranty covers the systems and appliances within your home, including typical appliances‑only, systems‑only, or combo plans. Standard inclusions often span HVAC, plumbing, electrical, water heater, and major kitchen appliances; pools/spas, well/septic, roof‑leak, and second refrigerators are common add‑ons (Bankrate; U.S. News 360 Reviews).
- Refrigerator
- Dishwasher
- Range/Oven/Cooktop
- Clothes Dryer
- Built-in Microwave
- Free-Standing Ice Maker
- Washer
- Dryer
- Garage Door Opener
- Trash Compactor
- Heating w/ Ductwork
- Electrical
- Water Heater
- Garbage Disposal
- Air Conditioning
- Ceiling Fan
- Doorbell
But just like home insurance, home warranties only cover your property under certain circumstances. As we noted in our review of the home warranty, “For the most part, the mechanical components of a unit or appliance — the parts necessary for function, like a drain pump in your clothes washer or the pilot burner in your water heater — are covered.” However, “cosmetic repairs” like knobs, dials, and covers usually aren’t included, and will require an out-of-pocket repair. Typical 2025 pricing runs about $30–$80 per month ($360–$960 per year) with a $75–$150 service fee per dispatched trade; plans impose per‑item caps (often ~$500–$3,000 for appliances; ~$2,000–$5,000 for systems) and annual aggregate limits that frequently fall around ~$10,000–$20,000 depending on tier/provider. Many contracts have ~30‑day waiting periods and exclude pre‑existing conditions, improper installation/maintenance, and code upgrades (Bankrate; U.S. News 360 Reviews; Angi; FTC; Consumer Reports). Provider policies differ meaningfully: Cinch Home Services advertises a 180‑day workmanship guarantee; AFC Home Club lets you choose your own licensed technician and extends workmanship for the membership term; American Home Shield, First American Home Warranty, and 2‑10 HBW offer tiered plans and large networks; and Liberty Home Guard lists broad add‑ons with clearly stated caps. Always confirm caps, fees, and whether multiple trades trigger multiple service fees before you buy.
Do I need both home insurance and a home warranty?
It depends on how much risk you’re willing to live with. Homeowners insurance is essential for catastrophic risks and liability and is usually required by lenders. A home warranty adds predictable costs for mechanical breakdowns of listed systems/appliances. In 2025, standard plans average roughly $360–$960 per year plus per‑claim service fees, which can be less than one major repair: an HVAC replacement commonly runs $5,000+ and a water heater replacement about $900–$3,000 depending on type and market (Bankrate; U.S. News 360 Reviews; Angi). Whether it pencils out depends on your home’s age/condition and the plan’s caps and exclusions.
However, make sure you read exactly what your home warranty will cover. “A lot of people expect a warranty to replace their appliances or to repair things that were never working,” Carl Knighten, the CEO of a 30-year-old home warranty company told BankRate. “Consumers need to understand what the policy covers and what it doesn’t.” Also check regulatory and satisfaction signals: states publish complaint ratios and enforcement actions for home warranty/service contract providers, and themes like denials for pre‑existing conditions, delays in dispatch, and disputes over caps recur across years (California DOI Complaint Study; Texas Department of Licensing & Regulation – Residential Service Companies; Florida OIR; FTC). Many insurers also reward risk‑mitigating devices (leak sensors, automatic shutoff) with credits or programs that can reduce losses and disruptions—ask your carrier what qualifies (Insurance Information Institute).
Still not sure whether you should buy a home warranty? Read our breakdown of the pros and cons. If you do proceed, verify the waiting period (~30 days), service fee amount, caps per item and per term, and whether your state regulates the provider as a service contract company; keep maintenance records to support claims (FTC; NAIC).
What’s next?
- See our picks for the best homeowners insurance companies and the best home warranty companies. When comparing home insurance, verify deductible structures (e.g., hurricane/named‑storm or wind/hail percentage deductibles), roof settlement terms (replacement cost vs. ACV), and optional protections like water backup, service line, and equipment breakdown; consider inflation guard and Extended or Guaranteed Replacement Cost to better track reconstruction costs; schedule high‑value personal property; and address special situations like home‑sharing with the right endorsement or policy (NY DFS; TDI; Washington OIC; HSB; III). Ask about prevention/mitigation bundles and discounts for leak/automatic water shutoff, monitored smoke/CO, or wildfire‑hardening; California’s Safer from Wildfires rules require carriers to offer credits for documented measures, and many insurers provide smart‑home credits (California DOI – Safer from Wildfires; III smart home).
- To optimize your home insurance coverage, don’t forget about keeping an up-to-date home inventory. Also map major exclusions and fill gaps: standard HO policies exclude flood (NFIP typically offers up to $250,000 building and $100,000 contents and no ALE) and earthquake; model your out‑of‑pocket if percentage deductibles apply, and consider adding leak sensors and automatic shutoff devices that may earn credits. For connected protection gear, look for the U.S. Cyber Trust Mark on new IoT devices and prioritize ecosystems adopting the Matter standard (v1.4 released in Oct 2024) to improve reliability and security (FloodSmart/NFIP; FEMA NFIP Manual; FCC – Cyber Trust Mark; CSA Matter 1.4; III smart home).
