Home Owners Insurance and Home Warranties
Home owners insurance and home warranties are both a source of peace of mind for home buyers. While both types of insurance have value, sometimes first-time buyers might be confused as to the differences.
One of the main differences is that home owners insurance is mandated by the lender, and unless the home is a cash purchase, the buyer needs to have home owners insurance at settlement. A home warranty is optional, and most often the buyer negotiates a home warranty in the contract as a purchase by the seller.
Home Owners Insurance is a much more complicated purchase, and warrants even more research. Home owners insurance provides ongoing protection against outside forces that damage a property. Several sources can help in the search for the right insurance: Consumer guides, state insurance departments and the National Association of Insurance Commissioners can provide direction. They also alert consumers to complaints against a company. [disclosure: paid link]
* Most home owners insurance policies cover:
- the home
- items inside the home
- sheds or garages, other detached structures
- loss of use, if something is destroyed and needs to be re-built, this will cover the living costs during re-building
- liability – if someone is injured on your property
- Consumers can buy extra insurance as an option, to cover belongings not covered in the basic policy.
The time for research is before closing, so a buyer needs to start asking questions during the home search. Check your auto insurance for bundling possibilities.
The Home Warranty
The home warranty usually has a time limit, one or two years, and is designed to ease the buyer’s financial risk during that time-frame. In the first year of home ownership, there are often new expenses, so in the off-chance that an older appliance breaks, or an older home system wears out, the home warranty will be there to cover that expense.
If a buyer is purchasing an older home, they will want to consider a home warranty to cover some of the older appliances and systems. Be sure to shop around as different companies vary in what they cover and for how long. Your agent will be a good resource for you.