When purchasing a new home, it’s important to do in-depth research on all facets of the homebuying process. One thing you’ll need to understand is how to 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 your options.
Home Insurance
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 is typically not covered. It 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.
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. Another consideration is whether you are purchasing a single family home, or a property such as a condo situated inside a homeowner association which also carries a master common area policy. Be sure to find out about the coverages available.
Home Warranty
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. Some home warranty policy coverages may be quite extensive, so if you are covered through one when you close escrow, be sure to review what's included before calling a repair person, because savings may be considerable if you have coverage. The upfront home waranty fee for a repair call is usually much less than paying a full cost repair man or plumber. Although not required, often a seller is willing to pay such a home warranty premium for one year, through escrow for the buyer.
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