Insurance or Warranty: What do you need to protect your new home?
When it comes time to purchase a new home, it’s important to dig in deep and research on all facets of the home-buying process. Part of preparing, is planning for the inevitability of something to go wrong--- leaky pipe, hailstorm damaging the roof, or a lawnmower throwing a rock through your window for examples. So how do you best protect yourself and your investment if anything were to go wrong. Check out the information on home insurance versus home warranty below to educate yourself on a few of the options.
Homeowners insurance pays for any accidental damages and loss that are caused by fire, lightning strikes, windstorms, and hail, however, damage from earthquakes and floods (and sometimes tornados) is typically not covered. Some insurance companies even provide additional coverage options if you live in an area where certain nature events are common. For example, in certain areas of Lake Worth and areas around Horseshoe Bend in Weatherford often will require additional flood insurance. Home insurance policies also covers the replacement of personal property in case of theft or damage and liability if a person were to get injured in your home or on your property. According to American Home Shield, the average annual cost of a homeowner's insurance policy ranges between $300 and $1,000, and the bank usually asks you to obtain a policy before the mortgage is issued (some lenders even take it out of your escrow to pay for you, so be sure to ask your lender for how they handle home insurance). Make sure to keep in mind that each type of coverage in the policy is subject to a limit and, in most cases, you will have to pay a deductible.
A home warranty is designed to cover the cost of repairs and replacements of larger appliances and crucial systems in your home that may fail or break due to age and wear and tear. This includes but isn’t limited to HVAC, electrical, or plumbing components, kitchen appliances, and your washer and dryer. With a home warranty, you are required to pay premiums year-round, even if you do not use it, and it won’t cover damages if appliances were not maintained properly or if the damage is from a fire or other disaster. Also, some plan options might require a service fee, such as $50-75 for a repair man from their preferred vendors to come and service the appliance of home system prior to replacing it, and could have them come out a few times before the warranty company is satisfied that the item in question needs to be replaced. As an added note, many home warranty companies are similar in plan options and what they cover, so be sure to shop around rates and coverage.This type of coverage, a home warranty, can often be negotiated at the sales table. It is not uncommon to see a seller pay for your first year of coverage as part of the home sales contract, with any subsequent years being renewed by the buyer of the home.
All in all, coverage of your newest investment is a good idea. Both the warranty and the insurance have initial costs, but serve to protect you in the long run. It is not a matter of if something will go wrong with the house, it is when... so do both and have a peace of mind to know you're covered.