When purchasing a new home, one of the foremost thoughts in a buyers mind should be how to protect their investment from day 1. But sometimes the options can be confusing, and it's difficult to know if all those different coverages are necessary or if someone is just trying to upsell. Here is a quick breakdown on the difference between a home warranty and homeowners insurance, so you can make an educated choice!
What is a home warranty? A home warranty is basically a service contract. This is going to provide you coverage over the life of the warranty for things like appliances that may break down. Most home warranties are subject to a small (under $100) deductible, making it cheaper and more effective to repair existing appliances than to purchase new ones.
What is homeowners insurance? Homeowners insurance is the policy that you will maintain for the entire time you own your home. Policies are renewed on an annual basis, and cover both items inside the home and the structure itself in the event of an accident or natural disaster. There are various different types of insurance policies, and coverages vary depending on the policy form, so make sure you work with a trusted agent and explore all of your options prior to purchasing coverage.
Which should you choose? If you're purchasing a brand new home full of brand new, fresh out of the box appliances, a home warranty may be a waste of your money! If, however, you're buying an older home, a home warranty may actually save you money in repair and replacement costs. In my opinion, the best way to determine if this coverage is right for you is to take a careful look at your home inspection. Any reputable inspector will take his or her time going over your new home with a fine toothed comb and will provide you with a detailed report. If there are any red flags, such as older wiring or minor leaks, a home warranty may be the best option for you!
Insurance, on the other hand, is a must! If you're financing your home, any mortgage company is going to request a copy of bound insurance prior to the closing. Any good insurance agent will quote your property with a variety of different companies, and will take the time to explain the coverages to you in detail if you have any questions. If your agent tries to force you to purchase a particular policy, or hesitates to respond to you inquiries, move right along and find a new one!
In a large majority of situations, both coverages working in tandem are going to provide you with the maximum amount of peace of mind. Home warranties are not usually very pricey - and can pay for themselves tenfold with just one broken appliance repair!
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