Homeowners Insurance and Home Warranties

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Homeowners Insurance and Home Warranties are always a topic of discussion during a home purchase. What’s the difference between the two? Do you need them? We have heard that question asked more than once and decided to clarify it with some home buying help.


Homeowners insurance policies are required by your mortgage lender because your lender has a substantial amount of money invested in your home.

Homeowners insurance policies are required by your mortgage lender …

The policy insures against serious financial loss, especially in the case of a natural disaster causing serious damage to your home. Homeowners insurance policy costs vary by location and by the various characteristics of the home. They are renewable on an annual basis. In Arizona most policies cost between $400 and $1000 depending on the factors mentioned above.

Answering the question: homeowners insurance vs home warranties?Homeowners insurance covers the structure and all the contents within it. Homeowners insurance generally provides coverage against acts of God, accidents, and theft or vandalism. Acts of God could include all forms of weather damage (wind or hail damage) and natural disasters (earthquakes or floods). Other examples of coverage provided by homeowners insurance would be:

  • A water pipe that burst and flooded a home. The policy would generally cover repair of the plumbing as well as restoration from the flood.
  • Fire damage caused from an electrical problem. The policy would generally cover repair of the electrical problem as well as restoration of the home.
  • Liability incurred from a guest having an accident on your property.
  • Liability from your dog biting someone.
  • Vandalism or theft of personal property

Keep in mind that a homeowners insurance policy carries a deductible. A deductible means the homeowner would cover the first $500, $1000, or $2500 of repairs to the home and the insurance company would cover the rest. Deductible amounts vary by company, and the policy deductible is chosen by the homeowner. A lower deductible creates a higher cost for the policy.


Home warranties are not required by your mortgage lender. In fact they are not required at all.

Home warranties are not required …

Home warranties generally provide peace of mind to a buyer who is concerned something in the house may break after they buy it. The cost of Home Warranties also varies by location, and they renew on an annual basis. Most will provide a basic protection for just under $400 and an advanced level of protection for around $500. Pool coverage generally costs an additional $125.

Home warranties generally cover things that break but do not cover restoration of the home. Let’s compare a home warranty and homeowners insurance policy by using the example of the above mentioned water pipes that burst. In the case of a home warranty only the broken pipes would be fixed but none of the home restoration would be covered.

Here are some examples of typical claims covered by home warranties:

  • dishwasher stops working
  • air conditioner doesn’t cool the house
  • water heater no longer gets the water hot
  • refrigerator stops working

Home warranties also require a deductible. Most deductibles range from $50-$75. However, please note the deductible is “per trade.” In other words, if your dishwasher and air conditioner both broke on the same day you would incur two deductibles. One deductible would cover the appliance repair person and a second deductible would be required for the air conditioner repair person. On the other hand one deductible would be required if you had 2 problems a plumber could fix.

The chart below provides a quick and general comparison of who to call.

Home warranties and homeowners insurance

Comparison purposes only: Homeowners insurance versus Home warranties


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