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Home Warranty vs Home Insurance: What Each One Covers (and Excludes)

How a home warranty service contract differs from homeowners insurance, what the contracts exclude, how caps and fees work, and when to buy one.

Updated October 30, 2026 · 7 min read

People buy home warranties expecting insurance and buy insurance expecting a repair plan. Neither does the other’s job. Homeowners insurance pays to rebuild and replace after sudden events such as fire, wind and theft. A home warranty is a service contract that repairs or replaces listed systems and appliances when they wear out, up to a dollar limit, for a monthly fee plus a per-visit charge. This guide uses the actual contracts and the Insurance Information Institute’s description of a standard policy to show where each one stops. Facts were verified October 30, 2026.

What homeowners insurance covers

The Insurance Information Institute (Triple-I) describes four parts of a standard policy. Dwelling coverage pays to repair or rebuild the structure after covered damage from events such as fire, hurricane, hail or lightning, with detached structures typically covered at about 10 percent of that amount. Personal-belongings coverage, generally 50 to 70 percent of the structure amount, replaces furniture and clothing that are stolen or destroyed by insured disasters, with sub-limits on jewelry and art. Liability coverage, usually starting around $100,000, pays legal costs and awards if you, your family or your pets injure someone or damage their property. Additional living expenses pay for a hotel and meals while an insured loss makes the home uninhabitable (Triple-I).

What it does not cover is just as defined. Triple-I states that a standard policy “does not pay for damage from floods, earthquakes, or routine wear and tear.” A furnace that dies at 18 years old, a refrigerator compressor, a water heater that rusts through: these are wear and tear, and insurance is not written for them. Flood and earthquake need separate policies.

What a home warranty covers

A home warranty is a contract with a service company, not an insurer, and the companies say so. Liberty Home Guard’s site notes that “home warranty” means “service contract” throughout (Liberty Home Guard); Cinch describes its plans as covering “a mechanical breakdown from routine use” (Cinch). The covered list is specific. Choice Home Warranty’s agreement names 13 standard items (clothes washer and dryer, built-in microwave, oven/range, dishwasher, garbage disposal, refrigerator, ceiling and exhaust fans, garage door opener, air conditioning/heating/ductwork, water heater, electrical system and plumbing) and 18 optional ones (Choice Home Warranty). American Home Shield’s ShieldSilver covers 14 systems and ShieldGold adds nine appliances (AHS).

Three features define the product:

Dollar limits. Choice’s “maximum liability is $3,000 per 12-month period” per covered item. AHS pays “$5,000 per system per agreement term” for HVAC, $2,000 per appliance on ShieldGold and a “$50,000 total limit per agreement term.” Liberty Home Guard caps most items at $2,000 but plumbing and electrical at $500, and $250 in the first 100 days (Liberty Home Guard sample policy). Select Home Warranty caps appliances, plumbing and electrical at $500 and HVAC at $3,000 (Select Home Warranty). First American sets no dollar cap on HVAC, plumbing or electrical but caps appliances at $3,500 on its Starter and Essential plans (First American). Cinch’s aggregate is $10,000 per term.

A service fee per visit. $100 at Choice; $100 or $125 at AHS and First American; $100, $125 or $150 at Cinch; $75 to $100 at Select; $65 to $125 at Liberty, assigned after enrollment. Several contracts charge it even when the claim is denied.

A waiting period. All six companies we track start coverage 30 days after purchase. Select’s contract adds that during those 30 days it will not pay for “replacement of entire systems, appliances, compressors, control boards, or motors of any kind.”

Where the two overlap, and where neither pays

A pipe bursts and floods the kitchen. Insurance pays for the ruined floor, cabinets and drywall, subject to your deductible; it will not pay to fix the pipe if it failed from age. A home warranty with plumbing coverage may pay to repair the pipe, up to its cap, but not the floor. Liberty’s policy specifically excludes wall damage from reaching plumbing or electrical items; AHS and Choice say they cover access damage, which is one reason to read each contract.

A furnace quits in January. Insurance does nothing. A warranty sends a technician for the service fee and pays up to the cap, which means $5,000 at AHS, $3,000 at Choice or Select, $2,000 at Liberty and an uncapped repair at First American. If the unit cannot be repaired, most contracts allow a replacement of similar features or a cash payment “in lieu of repair”; Choice’s agreement pays that at its own discounted cost, and Cinch’s Repair Only tier can buy out a claim for as little as $250 (NerdWallet).

A storm tears off shingles and water comes through the roof. Insurance. Every warranty contract we read excludes weather and natural disasters; AHS lists “floods, freezes, fires, electrical surges,” First American lists “floods, storms, earthquakes and freezes.” Some warranties sell a roof-leak add-on, capped at $1,000 at AHS and First American, which covers a slow leak from wear, not storm damage.

Things neither pays for: pre-existing conditions (AHS is unusual in covering unknown ones), cosmetic damage, code upgrades (First American’s Advantage add-on and AHS Platinum cover limited amounts), manufacturer recalls and items still under the manufacturer’s warranty, and failures from lack of maintenance at most companies. Select’s contract allows the company to request maintenance records, and This Old House reports that without three years of records Select may limit a payout to $150 per item (This Old House).

How the costs compare

Insurance premiums depend on the rebuild cost and location and are outside this guide. Home warranty entry plans, as of October 2026, run from about $36 a month for AHS’s systems-only ShieldSilver (This Old House average) through $45.83 for Liberty’s Appliance Guard ($549.99 a year on its site), $51 for Cinch’s Appliances plan, $60 for Choice’s Basic Plan and $60.42 for Select’s Bronze Care ($629.99 a year), to $77 for First American’s Starter Plan (This Old House). A plan at $60 a month with two $100 service calls costs about $920 a year. Measure that against the repairs you expect: a furnace or air conditioner in its second decade, a 12-year-old water heater, appliances past their design life. If the sum of likely repairs over the next few years is below the premiums and fees, or you can absorb a $2,000 bill from savings, self-insuring is usually the better trade. If one uncapped or $5,000 HVAC claim would be a crisis, a warranty with high system limits can be worth the premium.

Cancellation and the regulatory picture

Home warranties are regulated state by state as service contracts, and the contracts carry explicit cancellation terms. Choice refunds the fee less service costs in the first 30 days and then prorates with an administrative fee of the lesser of $50 or 10 percent; First American and Liberty charge $50; Select charges $75; AHS charges an amount equal to one month’s premium (AHS sample agreement). Most auto-renew unless you cancel in writing, Choice to a monthly plan. Complaint records differ sharply: Cinch has 2,682 BBB complaints in three years and an A+; Choice has 11,408, is not accredited, and settled an $11.8 million Arizona Attorney General case in February 2026 over allegations that phone sales staff failed to disclose exclusions (Arizona Attorney General). That settlement is the clearest argument for reading the sample contract before the sales call rather than after.

A short decision rule

  • You own a home: you need homeowners insurance, and in flood or earthquake zones, those policies too.
  • Your systems and major appliances are under about eight years old, or you keep a repair fund: skip the warranty.
  • Your HVAC, water heater or appliances are old and a $3,000 to $5,000 repair would hurt: price a warranty, compare the caps on the items you actually worry about, add two service fees to the annual premium, and read the exclusions. Our ranking scores six companies on price, coverage, limits, satisfaction and transparency, with every contract linked.

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