Home insurance and home warranties protect the home against different risks. Home insurance protects against fire, theft, or destruction, or even flooding, while a home warranty protects household appliance against normal wear and tear. For example, your home insurance would cover the damages if your hot water heater sprang a leak, and a home warranty would replace the hot water heater if it quit working. They fill two different roles, but work together to give you more complete protection.
Homeowners insurance is a real insurance policy, but a home warranty is not. A home warranty is issued for specifically listed appliances within the home, such as a hot water heater, washer, or stove, and works exactly the way the warranty works when you buy an appliance new. If the item stops working while the warranty is in effect, and the cause is covered under the warranty, then repairs or replacement of the defective item will take place. Without a home warranty, you are responsible for the full cost of repair or replacement out of your own pocket.
In many cases, the home seller will purchase a home warranty and that will transfer to you along with the home. This option means that if an appliance that was sold with the home breaks down within the specified term, it will be repaired or replaced without cost to the new homeowner. If the home does not come with a home warranty, you may be able to purchase one as part of your mortgage, reducing the complications of home ownership during the first few years you have the property.