Home Warranty vs. Home Insurance: Covering Defects Versus Disasters

While both sound like protection for your home, a **Home Warranty** and **Home Insurance** are entirely separate products that cover different types of risk. Confusing the two can lead to significant financial shortfalls when a breakdown occurs.

Home Insurance: Protecting Against Catastrophe (Perils)

**Home Insurance** (Article 1) is a mandatory policy that protects your financial investment against large, sudden, and accidental losses caused by *covered perils* (fire, windstorm, theft, etc.).

**What it Covers:** Damage to the structure and contents caused by a sudden, external event.
**When it Applies:** When your roof is damaged by hail or your home is burglarized.

Home Warranty: Protecting Against Breakdown (Systems)

A **Home Warranty** is a service contract designed to cover the repair or replacement of major appliances and home systems (HVAC, plumbing, electrical) that fail due to normal wear and tear and age.

**What it Covers:** Malfunction of mechanical systems and appliances.
**When it Applies:** When your water heater breaks or your dishwasher stops working.

Feature	Home Insurance	Home Warranty
Focus	External, sudden perils.	Internal system and appliance failure.
Cost Structure	Annual Premium + Deductible.	Annual Fee + Service Call Fee (Trade Service Fee).

Crucial Note: Insurance covers the effects of an earthquake; a Warranty covers the gradual failure of your oven. You need insurance; a warranty is optional, extended maintenance.

A **Home Warranty** can be a useful budget tool, but it should never be viewed as a substitute for the catastrophic financial protection provided by **Home Insurance**.