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Home warranties and homeowners’ insurance can both help when something expensive goes wrong at home, but they are designed for very different problems. If an aging air conditioner stops working due to a covered breakdown, a home warranty may help with the repair. If that same equipment is damaged in a covered fire, homeowners’ insurance may come into play instead.The distinction matters because homeowners sometimes assume one type of protection can substitute for the other. But that’s usually not the case.The Federal Trade Commission describes a home warranty as a service contract that can help pay for certain repairs or replacements involving systems and appliances. Homeowners insurance, on the other hand, protects against covered losses to the structure, belongings and other risks identified in the insurance policy.Here’s how the two types of protection compare.Don’t let an unexpected appliance or system failure catch your household budget off guard. Explore flexible home warranty plans from American Home Shield to keep your major home components covered when breakdowns happen.
What Does a Home Warranty Cover?
A home warranty generally focuses on mechanical systems and appliances that stop working under the terms of the service contract.
American Home Shield’s current homeowner plans can include covered components of heating and air-conditioning systems, electrical systems, plumbing, refrigerators, dishwashers, ovens, washers and dryers, depending on the plan selected. AHS ShieldSilver focuses on major home systems, while ShieldGold adds covered appliances. ShieldPlatinum includes those systems and appliances, along with additional benefits.
The key point is that coverage depends on the contract. A home warranty is not a promise to pay for every malfunction in the house.
What Does Homeowners Insurance Cover?
Homeowners insurance is built around covered losses rather than routine equipment breakdowns.
The National Association of Insurance Commissioners says a standard homeowners policy can include protection for the dwelling, other structures, personal property, loss of use, personal liability and medical payments to others. Policies generally cover losses caused by specific perils or by all risks except those expressly excluded, depending on the form.
Common covered perils can include fire, lightning, windstorm, hail, theft, vandalism and smoke damage, subject to the policy terms. That is fundamentally different from paying to repair a dishwasher that simply stops working.Related: How Much Does a Home Warranty Cost in 2026? Plans, Fees and Add-Ons Explained
Home Warranty vs. Homeowners Insurance: What Does Each Pay For?
The easiest way to understand the difference is to look at the cause of the problem.
Home Warranty May Apply
AC fails from covered wear and tear
Usually no
Yes, if covered
Kitchen damaged by covered fire
Yes
No
Plumbing component breaks from covered wear
Usually no
No
Guest is injured and owner is liable
Liability coverage may apply
Coverage always depends on the individual contract or insurance policy. If your concern is the cost of repairing aging systems or appliances, American Home Shield offers plans aimed specifically at those types of covered breakdowns.
Does Homeowners Insurance Cover Appliance Breakdowns?
Usually not when an appliance fails from age or ordinary use. Homeowners insurance is not generally designed to function as a maintenance or repair plan.
For example, if your refrigerator compressor stops working after years of use, a standard homeowners’ policy would not typically pay simply because the appliance reached the end of its useful life. But the circumstances matter.
If an appliance is damaged by a peril covered under your homeowners policy, the resulting loss may be handled differently. That is why homeowners should focus on what caused the damage, rather than simply asking whether a particular appliance is insured.
Does a Home Warranty Cover Fire, Theft or Storm Damage?
Generally, that is not the purpose of a home warranty. The FTC explains that home warranties typically cover repairs or replacements involving appliances or systems under a service contract. They are not replacements for property insurance.
If a storm damages your roof, a fire destroys part of your kitchen or someone steals belongings from your home, you would generally look to applicable homeowners’ insurance coverage rather than a service contract.
American Home Shield’s ShieldPlatinum does include limited roof-leak repair coverage, currently up to $1,000 per agreement term, but that benefit should not be confused with homeowners’ insurance coverage for storm or structural damage.
How Are Home Warranty Service Fees Different From Insurance Deductibles?
Both can leave homeowners responsible for part of the cost, but they work differently.
With homeowners’ insurance, the deductible is generally the amount the policyholder is responsible for before applicable insurance payments are made on a covered property claim. Home warranties commonly use a service fee when a homeowner requests service.
The FTC recommends checking these fees when evaluating a service contract because they can increase the actual cost of using the plan.
American Home Shield currently offers homeowners a choice of $100 or $125 service fees when purchasing a plan. Coverage limits and charges for non-covered work can also apply.
What Doesn’t Homeowners Insurance Usually Cover?
Homeowners insurance has important exclusions of its own.
NAIC notes that standard policies generally do not cover flood damage or earthquake damage without separate coverage or endorsements. It also identifies other commonly limited or excluded areas, such as infestations and certain mold losses.
Insurance policies also differ by company and state, so homeowners should review their declarations page, exclusions and endorsements rather than relying on general rules. That is especially important for major risks such as flood and earthquake damage.
Pairing standard homeowners insurance with a home warranty gives you comprehensive protection for both property losses and routine mechanical breakdowns. Get a customized quote from American Home Shield today to find coverage tailored to your home’s specific needs.
Can Home Warranty and Homeowners Insurance Coverage Overlap?
Sometimes a problem can involve both.
Imagine a plumbing component fails, causing water damage. A home warranty could potentially address the covered plumbing component itself, while homeowners’ insurance might address resulting water damage if the cause and loss meet the insurance policy terms.
That does not mean both automatically pay. Each company evaluates the loss under its own agreement. This is another reason to keep copies of both your home warranty contract and homeowners’ insurance policy accessible.Related: 7 Home Security Fees To Check Before You Sign a Contract
Do You Need Both a Home Warranty and Homeowners Insurance?
For many homeowners, they serve complementary rather than competing purposes.
Homeowners insurance protects against potentially catastrophic covered losses involving the house, belongings and liability. Mortgage lenders also commonly require borrowers to maintain homeowners’ insurance.
A home warranty is optional and addresses a different concern: certain covered breakdowns involving systems and appliances.
The FTC recommends comparing the cost of a service contract with its coverage, service fees, limitations and any protection you already have before buying. A newer home with appliances still under manufacturer warranties may present a different value proposition than an older house with aging HVAC, plumbing and appliances.
Home Warranty vs. Homeowners Insurance: Which Protection Do You Need?
The answer depends on the risk you’re trying to protect against.
For fire, theft, liability or covered storm damage, homeowners’ insurance is the relevant form of protection. For certain mechanical failures caused by covered breakdowns of systems and appliances, a home warranty may help fill a different financial gap.
Neither should be assumed to cover everything the other does.
While homeowners’ insurance protects against major perils like fires and storms, it doesn’t cover everyday mechanical wear and tear. Choose an American Home Shield warranty plan to help bridge the gap and protect your budget when essential equipment fails.
Some or all of this content may have been generated by AI. While we strive for accuracy, AI can occasionally produce incorrect information. If you buy something via one of our links, we may earn a commission.
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