Home ownership comes with a lot of unknowns — Will my 15-year-old furnace keep working? Could a freak hailstorm wreck my roof?

When you start thinking about all the “what ifs,” the list can get long. It’s impossible to plan for all the things that could go wrong with a house, and when something does happen, home insurance can cover the cost of most incidents to protect your home investment and bank account.

But home insurance doesn’t cover everything.

While insurance can cover the cost of repairing a roof in a freak hailstorm, it doesn’t cover the cost of normal wear and tear inside or outside your house. For example, if your A/C stops working because of a super-hot summer season, you can’t make an insurance claim for “heat failure.” You have to replace or repair the system yourself. That’s where a home warranty can fill the gap.

What is a Home Warranty?

Home warranties are contracts that cover the “inner-workings” of your home.

That means components like your HVAC system or refrigerator stop working, you have some type of coverage that reduces the cost of replacement or repairs. By paying a monthly fee, you ensure that the expense of repairing something after normal wear-and-tear won’t exceed a fixed dollar amount.

Most home warranties cover several appliances or home systems in a single package, so the cost of repairing or replacing your refrigerator is the same as a central A/C unit. There are more specific coverage plans, too, if you just want to cover the cost of one system.

Do You Actually Need a Home Warranty?

Home warranties are certainly great to have when something breaks. The cost of the deductible is always less than the out-of-pocket cost, and if multiple appliances or home systems wear out in a year, the warranty will generally pay for itself.

The downside?

You always have to pay for your coverage monthly, even if nothing breaks. That means if you have a reliable set of appliances, you’re paying extra for something you may not need. You also have a lot less control over your money compared to alternatives like a blanket “emergency fund.”

So, do you really need a home warranty?

Maybe! Warranties always add peace-of-mind and make home repairs simpler for the homeowner as well as cheaper. Ultimately, it’s all about whether you will use the coverage. If you’re purchasing an older home, you’re more likely to use a home warranty and could benefit from the cost savings.

Ultimately, both home warranties and insurance plans are designed to protect you and your investment. As a homeowner, you should always purchase home insurance to avoid disasters, and a home warranty is an optional cost that can enhance your coverage for your peace of mind.