Home warranty and homeowner’s insurance.
Two different products that get confused constantly. You want both, and here is why.
These two get confused constantly, and the confusion costs people money at the worst possible moment. They are not alternatives. They cover opposite categories of problem, and a homeowner really wants both.
Homeowner’s insurance
Covers sudden, unexpected damage to the structure and often your belongings. A hail storm takes the roof. A pipe bursts and floods the kitchen. A fire. A tree comes through the window. Someone is injured on your property and sues.
Your lender will require it if you are financing, and they will want proof before closing. You pay an annual premium and a deductible when you claim. This one is not optional in practice, and it is usually escrowed with your mortgage payment.
Home warranty
Covers things that break down from ordinary use. The air conditioner stops cooling in July. The water heater quits. The dishwasher dies. The garage door opener gives out. Age and wear, not disaster.
You pay an annual fee plus a service call fee each time you use it. Nobody requires you to have one, which is exactly why people skip it and then regret it.
The difference in one sentence
Insurance covers what happens to the house. A warranty covers what happens in the house.
Why you want both
Picture the two most common first-year surprises for a new homeowner.
- The air conditioner fails in August. Insurance will not touch it, because nothing damaged it. It simply reached the end of its life. That is a warranty claim, and in Texas it is the difference between a service call fee and several thousand dollars.
- A storm tears off shingles and water gets into the ceiling. A warranty will not touch it, because the damage was sudden and external. That is an insurance claim.
Neither policy is a substitute for the other. Carrying only insurance leaves you exposed to the failures that are most likely to happen, because systems and appliances break far more often than roofs blow off. Carrying only a warranty leaves you exposed to the failures that would be most expensive.
Two things worth knowing before you close. A home warranty is negotiable in the contract, and sellers often agree to pay for the first year, so ask. And a seller can carry coverage during the listing period, which protects them while the home is on the market. Neither happens unless someone brings it up.
What a warranty will not do
- Fix something that was already broken when you bought the house. That is what your inspection is for.
- Cover poor maintenance. Filters, flushes and servicing are still your job.
- Replace an entire system with no limits. Read the coverage caps, and read what counts as an exclusion.
- Cover everything automatically. Pools, wells, septic, second systems and some appliances are usually add-ons.
The one thing neither of them covers
Ownership itself. If someone shows up claiming an interest in your property, if an unknown heir surfaces, or if a lien was paid but never released, neither your insurance nor your warranty is any help. That is title insurance, and it is the third leg of the stool.
Every transaction is different, and this is general information rather than legal or tax advice. Ask your agent, your escrow officer, and where it matters, an attorney.