Do I Need Homeowners Insurance and a Home Warranty?

Adam Morgan
Adam Morgan

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. You might even be under the impression that home insurance will cover everything in your home if it’s damaged, broken, vandalized, or stolen. But that’s not actually the case. Even the best homeowners insurance companies put limits on what your policy covers, which is why so many people choose the added protection of a home warranty.

What does homeowners insurance cover?

A standard homeowners insurance policy — also known as an HO-3 — covers the following:

  • 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”:

  • 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:

  • 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.

Do I need both home insurance and a home warranty?

It depends on how much risk you’re willing to live with. Obviously, we recommend home insurance for every single homeowner (and if you use a mortgage lender, it’s almost certainly required). While a home warranty does add an average annual cost of $300-$600, for most people that’s still much cheaper than paying for repairs out-of-pocket. Replacing the gas control valve on your water heater, for instance, costs an average of $500 alone.

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.”

Still not sure whether you should buy a home warranty? Read our breakdown of the pros and cons.

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About the Authors

Adam Morgan

Adam Morgan Contributor

Adam Morgan is a former senior editor for He's written about banking, credit cards, home warranties, insurance, and many other subjects (like running shoes) to give our readers the best information to assist in their buying decisions. His writing has been featured in The Los Angeles Times, Chicago Tribune, The AV Club, The Guardian, Chicago magazine, Minneapolis Star-Tribune, and elsewhere.