When buying a home you hear a lot of terms that may be new to you, or can be a little confusing. For example, you will be asked about homeowners insurance and homeowners warranties. Wondering what the difference is between the two? According to progressive.com, a home warranty plan protects the appliances and systems in your home: major home appliances, electrical, plumbing, and HVAC systems. Unlike your homeowners insurance policy, which protects your home from covered perils, a home warranty is a service contract that covers general wear and tear.
Homeowners Insurance:
* required when purchasing a home with any type of loan
* several factors determine the cost of your homeowners insurance policy, including location, size and condition of the home, the amount of coverage, and more. The average home owner’s insurance policy in the US is $1428 (bankrate.com)
* buyer can shop for their own policy! (pro-tip, ask your agent to recommend and insurance broker that can find the best rates at no cost)
* paid for at closing as part of the closing costs
* updated every year by buyer/owner of home, remember to update your insurance value if you make upgrades or renovations to the home!
* Homeowners insurance typically covers your dwelling, other structures on your property, personal property, personal liability, medical payments to others, and loss of use costs.
Home Warranty:
* this is an optional service, and can be purchased by buyer or paid for by seller at closing
* plans typically start at $300/year, you will also pay a service fee for any service calls to have the appliance or system
* is a service that typically covers appliances and systems in your home
* is purchased or updated yearly
* the warranty company may only allow certain service companies to estimate and/or complete the requested work in order for the warranty to cover the repair
