Whenever you plan to buy a home, you will come across the term home warranty and home insurance. Your mortgage specialist or the real estate agent could ask you to purchase them both. After all, they simply safeguard your investment in case something goes wrong. But, it is important to know that they are different things and do not serve the same purpose.
They offer different types of protection and knowing how each one works can help you decide which one you need.
A home warranty is nothing but a service contract that will help pay for the repairs as well as the replacement of the household appliances or systems that it covers. You will have to pay an annual or monthly fee for the same. Whenever a system or an appliance in your home breaks down, you can contact the home warranty company which will send a professional to help identify the problem and fix it. Say, you need HVAC repair and replacement, you only have to pay the service call fee for the same. There are certain limits up to which the cover is available and if you receive a home warranty as a part of the real estate transaction, your coverage will begin as soon as you buy. You can also purchase a home warranty for a place you already own.
What will it cover?
The home warranty will cover the systems as well as appliances in your home and they are available in different plans. One is an appliance plan which will cover the washing machine system, dishwasher, refrigerator, etc., then there is a system plan which covers the HVAC system, as well as the electrical systems. Now, if you want a simple plan that covers both, you can opt for the combination plan that includes everything and covers the appliance as well as the systems. That said, you can also add coverage at an additional cost for the items that are not a part of the standard plan. Such items include septic systems, pools, or a second air conditioner.
How much will it cost?
Your home warranty will have two fees– an annual fee and a service fee. The annual fee is the amount you pay for the plan you choose and the service fee is the amount you have to pay whenever you ask for repairs for the covered system or appliance.
Homeowners’ insurance will protect you from the losses or damages that are caused by the covered perils. There are different types of coverage offered ranging from coverage for the structure of the home to coverage for your personal belongings. There is also liability protection that will cover you from the injuries that are caused to other people.
What does it cover?
Homeowners insurance will cover the home, and its belongings as well as third-party liabilities. 16 types of perils are covered under a standard policy and it helps to have an idea about the same before you purchase one. Read the documents thoroughly to ensure that you are choosing the right plan.
How much will it cost?
There is no standard rate for a home insurance policy. The amount you pay will depend on factors like the neighborhood, the size and condition of your home, rebuilding costs of the home, value of the personal belongings, your credit score, the coverage limits you choose, and the history of your home insurance claims.
To conclude, a home warranty will cover the cost of a system or appliance and you will be able to save money when it breaks down or needs repairs. Home appliances can cost a lot of money and with a home warranty, you can save on the same. While it is optional but it can provide an additional layer of protection and will give you a lot of peace of mind. If you are someone who invests a lot of money in appliances and home systems, it makes sense to buy a home warranty. Otherwise, it can become very expensive for you to get it repaired or replaced.
A home insurance policy, on the other hand, will cover the home as well as the belongings from perils like theft. It is a highly useful policy that provides personal liability coverage as well. A lot of mortgage lenders require you to have a home insurance policy but even if it is not required, it makes a lot of sense to protect your home with the right insurance coverage. No matter what you decide to buy, read the fine print so that you know what it covers and what it doesn’t cover. This will help avoid any surprises if something goes wrong and you will be well prepared to handle the situation.