A home warranty is a service contract between a homeowner and a home warranty company. The contract covers repair and replacement costs on major home systems and appliances in the event of breakdowns associated with normal wear and tear.
A HOME INSURANCE POLICY is designed to cover accidental damage to your property and possessions, as a result of theft, fire, natural disasters, etc. The four main areas of coverage are interior, exterior, personal property, and general liability, but homeowners insurance does not cover issues related to natural wear and tear. That means that if one of your essential home systems or appliances simply stops working, then your policy probably isn’t going to cover it.
Unlike homeowners insurance, a home warranty is not mandatory when purchasing a home. The main purpose of a home warranty is to offer coverage for the items that homeowners insurance overlooks — key items, appliances, and home systems that inevitably end up needing to be repaired or replaced over time. This is not limited to new items; which items or systems are covered depends upon the specific warranty plan.