Home Insurance vs. Home Warranty: What’s the Difference?
As a hopeful buyer, you may have heard the terms home insurance and home warranty mentioned by your realtor or real estate agent. While they sound like similar things, they have two very different purposes.
Home insurance primarily protects your property from accidental damage caused by specific events like a flood or fire. A home warranty only covers particular components of your house and pays for the repair or replacement. Using both services means your house will be protected no matter what happens down the road.
Home Warranty
Home warranty policies are a great way to protect the inside of your house. Any time an appliance or system has a failure due to age or natural wear and tear, your service provider will pay for the parts and labor of the repair. However, if the broken component is too old or expensive to fix, the warranty company may just replace your machine with a brand new one.
Most home warranties cost about $30 to $50 per month, but that can vary depending on the service provider, geographic location, and level of coverage. Most contracts also only last a year, so you will need to renew annually.
Warranties cover a wide range of appliances and systems. Even the most basic levels of coverage will protect your refrigerator, stove, or dishwasher. Bigger plans will also protect other parts of your home like the HVAC system, electrical, or plumbing. For example, if you suddenly find yourself without a functioning air conditioner in the middle of summer, the service provider will help you find a repair service and pay the bill.
Home Insurance
Similar to a warranty, your insurance will protect your property from specific things. Damage created by storms, floods, fires, or theft are included in most policies, but it won’t pay for repairs caused by general use. So if you have a washing machine that stops working, you probably won’t receive any assistance from the insurance company. Instead, your provider would cover the costs of repairing your roof from hail damage or a broken window caused by a burglar, both of which wouldn’t be covered by a home warranty.
When purchasing your new home, your lender will require you to buy coverage before taking ownership of the house or completing the sale. That’s because they want to ensure the property is protected in case of natural disasters or accidents.
Home insurance policies usually cost anywhere from $300 to $1,000 a year, depending on your location, house size, building type, and the service provider. Like a home warranty, the coverage will need to be renewed annually.
Buying a house will likely be one of the most significant investments you will make in your lifetime. That’s why you should consider both warranty and insurance coverage to protect your new home. Whether you plan to stay in your new residence for years or eventually move your family to a bigger house, both services can give you peace of mind and save you thousands of dollars.
When the sale of real estate takes place, a certain amount of time might be allotted after a contract is created but before the transaction is finalized. During this time the buyer may decide not to follow through with the deal set forth in the contract. This ‘option period’ allows buyers to have a property inspected and its value ascertained without the risk of losing the property to another buyer.