Understanding the Difference Between Home Insurance and Home Warranty Plans

Understanding the Difference Between Home Insurance and Home Warranty Plans

It’s likely that your home is the largest investment you’ve ever made. And so, it makes sense that you’ll want a plan to protect your investment. And, between the mortgage payments, utilities, taxes, and other fees you may incur, you’re probably already stretching your budget. Now, throw in the inevitable maintenance that a home requires, which can cost hundreds to thousands of dollars any given year, and you may start getting a little (or a lot!), nervous. But that doesn’t have to be the case. That’s why we’re explaining the differences and highlighting the benefits of home insurance and home warranty plans. In the end, when you supplement your home insurance with a home warranty (like an award-winning American Home Shield home service plan), you are giving yourself a sense of security- both mentally and financially. Let’s start by outlining the differences between home insurance and a home warranty or service plan. Ready? 


What is Home Insurance?

In a nutshell, a standard home insurance policy protects you from four things: 

  • Structural Damage: Accidental damage to the external and internal structure of your home due to storms, fires, and some natural disasters. This usually covers adjacent structures such as a garage or shed. Also, for example, if a pipe bursts in your home, insurance would likely cover the repairs and replacement for any damaged items. 
  • Personal Property: Personal property, like furniture, will be covered in the case of a theft, or damage from an insured disaster.
  • Liability Protection: This covers homeowners from lawsuits that arise due to injury or property damage that you or your family may cause to others, or injuries that a guest sustains on your property. In some states, depending on the type of pet, insurance may cover medical expenses due to property damage or physical harm caused by your pet. 
  • Living Expenses: If an insured, natural disaster like flood or storm damage strikes and you are unable to reside in your home, insurance will cover living costs such as meals or hotel bills. 

    Why is Home Insurance Required?  

    Home insurance is required by most mortgage lenders because it’s financial protection for the investment that they’re making in your home. 

    Of course, keep in mind that everyone’s insurance policies differ and it’s critical to understand what is covered when selecting your home insurance policy. For example, some mortgage lenders may require flood insurance, while others may allow you to select that as an option. And, not all natural disasters are covered by default.  

    What is a Home Warranty or Home Service Plan? 

    While home insurance is an important precautionary measure to protect you from catastrophic loss or damage, a home warranty covers the standard wear and tear, and failure that arises when parts of major home systems and appliances breakdown. After all, when it comes to home appliances and systems it’s not a matter of IF, it’s a matter of when. In fact, you’re 28 times more likely to use a home warranty plan than your home insurance! And, with a
    home service plan from American Home Shield, which earned the Women’s Choice Award for being the most recommended home warranty service by women across America, you can select from several plan options to find the one that best meets your home’s needs. Below we share what is typically covered through an American Home Shield home service plan under the categories of ‘home systems’ and ‘home appliances’:  


    Home Systems Include:

    • Air Conditioners
    • Heating/HVAC Units
    • Ductwork
    • Electrical (i.e. built-in exhaust, vent & attic fans, main breaker & fuse panel box, interior electrical lines, ceiling fans, garage door openers)
    • Doorbells & Chimes
    • Plumbing (i.e. water heaters; interior plumbing lines; toilets; faucets & valves; plumbing stoppages; water leaks; whirlpool tub & motor parts; and damage from sediment, rust and corrosion

    Home Appliances Include:

    • Refrigerators
    • Ranges/Ovens/Cooktops
    • Dishwashers
    • Built-in Microwaves
    • Clothes Washers
    • Clothes Dryers
    • Garbage Disposal
    • Instant Hot/Cold Water Dispensers

    What’s awesome about this list is that with American Home Shield, all of these appliances and systems are covered regardless of age, make or model. And, maintenance services such as re-keying, discounted HVAC tune-up, and discounted air filter delivery are also available for all American Home Shield members.

    American Home Shield provides an excellent overview of each of the appliances and systems, including what is specifically covered and not covered for each, as well as some of the typical costs that it would require to repair or replace certain appliances when you do not have a home warranty. Using this guide, you can really get a sense of just how much you may be able to save! 

    How Much is a Home Warranty?

    You may think that with all of the appliances and systems covered regardless of age, make or model, that the cost for a home warranty plan would be astronomical, right? Well, we are happy to share that these plans, on average, are $50 - $75 per month, depending on the home service plan you select and can save you thousands of dollars in repair and replacement costs every year. Of course, check their website for the most updated pricing options. 


    Home warranty service contracts are usually for a term of 12 months, and customers are required to pay for the initial, service request when an issue arises and a trade professional (i.e. plumber; electrician; etc.) must come to your home. A ‘Trade Service Call Fee’, as it’s called, will depend on the home service plan that you select, but can cost between $75 - $125. 

    It’s also an added bonus that you don’t have to worry about searching around for a service contractor, because American Home Shield takes care of that. So, you’re not only saving yourself the headache of searching, vetting, and then getting quotes, but you’re potentially saving yourself hundreds or even thousands of dollars in repairs and/or replacements.  

    And, if you are interested in more specifics on coverage, be sure to check out this American Home Shield sample contract so you’re aware of anything that may not be covered. 

    Real-Life Scenarios

    We get it – life happens! And while the list of things that can go wrong with your home systems and appliances can be a long one, we’re sharing a few scenarios and how a home warranty can save you money.

    • Scenario #1: Let’s All Cool Down

    It’s summer and temperatures are rising. So naturally, your A/C has waited all year to breakdown now. The kids are getting antsy, the dog is panting, and you have to get up early to head into work.  To top it off you may be aware that it could cost up to $3,800, to repair or replace your A/C without a home warranty. So, you’re getting a little ‘heated’ to say the least. 

    Luckily, with a home warranty you’re not scrambling to find someone to come assess and repair your A/C unit. You also don’t have to deal with going back and forth screening companies for the best rates. And best of all, you likely won’t have to worry about big out of pocket expenses! Instead, when you have a home warranty provider, like award-winning American Home Shield, you may request service 24/7 online or by calling them directly. They will assign a qualified contractor to diagnose the issue. Whether it needs to be repaired or replaced, you’ll all get to cool back down and back to living life. 

    • Scenario #2: Buon Appetito!

    You’ve waited all week to go food shopping, and as usual, spent several hundred dollars on food and beverages for the family. But, by the time you get home and open your refrigerator you realize it is no longer cool inside. You try everything: checking the plug, the breaker, turning up and down the temperature inside the refrigerator, but nothing seems to work. You fit as much food as you can into the freezer and ask the neighbors to hang on to a few other items. After some research you may have come to realize that it could cost up to $1,500 to repair or replace a refrigerator without a home warranty. 

    But again, with a home warranty like an American Home Shield service plan so that they can assign a contractor to assess the cause of the failure.  In this case, you learn that the motor was nearing the end of its life due to normal wear and tear, and aside from the trade service call fee (which varies depending on the amount you select when you purchase your home service plan), the motor was replaced at no additional cost to you, and the refrigerator is back in working order.  

    out of order

    • Scenario #3: Thankful for the Little Things

    So often we forget to be thankful for the little things in life, like having a washer and dryer for the mounds of clothes we clean each week! And yet, we tend to be reminded of that only when those items take an unexpected turn for the worse. With washers and dryers there are many parts and components and there can be a multitude of reasons why they stop working. From normal wear and tear to drainage problems, strange noises, or stopping mid-cycle, a washing machine alone can typically cost between $170 - $700 to repair or replace. 

    With a home warranty provider, like American Home Shield, you pay your initial trade service call fee, which is determined in your contract and can range between $75 - $125, and after that, your home warranty provider will cover any repairs or even a full replacement, should it be needed from normal wear and tear for covered items. 


    So there you have it. While home insurance is typically mandatory for catastrophic life events, and a home warranty or service plan is optional, it’s clear that having both is critical to giving yourself peace of mind both mentally and financially. And knowing that you’re about 28 times more likely to use your home warranty plan than your home insurance, it’s a smart financial decision. Of course, there are various options of home warranty plans to choose from, but we’ve already done the work to determine the plan that is most recommended by women across America, American Home Shield. And not only is it the most recommended, but they are leaders in the industry. 

    To celebrate their 50th anniversary this year, American Home Shield has launched their best home service plans yet to help you protect your home and keep it running smoothly. For American Home Shield members, a home service plan is like a home warranty, but better because it includes member-exclusive pricing on home maintenance services, as well as a variety of home services — from tech installation and setup to pre-season HVAC tune-ups, and more. American Home Shield plans work harder to give you peace of mind while protecting your budget.