Is a home warranty the same thing as home insurance? This is a question we get often. They are not the same. And if you’re buying a home, you need to know the difference between the two.
What is Homeowners Insurance?
Homeowners insurance pays for any accidental damages and loss caused by events such as fire, hail, lightning strikes, and windstorms. It provides protection against many major perils, but not all.
What else does home insurance cover?
Homeowners insurance also covers the replacement of personal property in case of theft. It also covers damage and liability if a person gets injured in your home or on your property. One major peril it usually doesn’t cover is flooding. Flood insurance is a separate issue and is an additional fee.
What are the costs?
The annual cost of a homeowners insurance policy ranges can range from around $700 to $4,000. There are numerous factors that an insurance company evaluates when offering insurance. But the basic rule is the more coverage you want, the higher the cost. Other factors they consider when quoting you a price are an applicant’s prior history of claims as well as the home’s condition. Make sure to keep in mind that each type of coverage in the policy is subject to a limit and, in many cases, you will have to pay a deductible. To compare policies and prices from various Texas Insurance Companies, click here.
Is Home Insurance a Requirement?
Lenders require homebuyers to secure homeowners insurance before closing on a home. Failing to obtain property insurance before closing may delay the transaction or end it completely. The bank usually mandates a policy before issuing the mortgage.
Keep in mind that if one insurance company denies you coverage, another company may offer you coverage. Ask for a copy of the CLUE report. Insurance companies have varying acceptance standards, and the condition of the home you’re buying may be preventing you from obtaining insurance.
So, shop around to find yourself the best deal for the coverage you want. A local insurance agent that we know and recommend is Rick Villarreal with State Farm. Give him a call today! He can help put together an insurance package that suits your needs. And for more information, you may also contact the Texas Department of Insurance.
What is a Home Warranty?
While homeowners insurance helps provide protection against major perils, a home warranty is based on appliances and systems. Home warranties cover the cost of repairs and replacements of home appliances and systems. Systems are like electrical, plumbing, and HVAC systems. Warranty companies usually consider appliances to be items such as dishwashers, garbage disposals, washer/dryer, etc. Home warranties are optional and not required by most lenders.
Costs of a Home Warranty
Just like home insurance, the cost of a home warranty varies depending on the level of coverage you desire. Basic coverage usually starts around $500/year. Obtaining additional coverage, like a pool or septic system, increases your cost.
There is also the cost of service calls. When an item breaks and you call your home warranty company for them to send someone out to diagnose the issue, they’ll charge you around $75, regardless if they decide to fix it or not.
Read the Fine Print!
The devil is in the details so read the fine print! Home warranties are contracts of inclusion. This means that they cover only items that are listed and spelled out.
Home warranty companies are tricky and can deny claims based on many criteria. Failure to maintain an appliance correctly is one reason. Another is when the warranty company calls the issue a pre-existing condition and denies the claim. They also may say it was not properly installed or maintained. And sometimes they can deny a claim because that one tiny little item, hidden deep inside the HVAC system, is something they don’t cover. (Remember home warranty contracts are contracts of inclusion!) Some companies require you to have regular maintenance on your covered items. If you don’t, they can deny your claim because the contract is no longer valid. And don’t hire an outside contractor to fix the problem. This is a sure way to have your claim denied!
It’s important to do research and compare apples to apples when diving into the details of insurance and warranty companies. Homeowners insurance and home warranties are very different but both are usually part of a home buying transaction.
For a more in depth dive into homeowners insurance, click here. For a more in depth education on home warranties, click here. And as always, feel free to contact us if you’re thinking about buying or selling a property.