The average person today rents for six years before making a first-home purchase. So, when a person finally decides to buy a house, he or she is usually highly excited about the event.
If you are a first-time home buyer, you’re probably feeling overly excited, too, and rightly so! Buying a house is an incredible event, but it is also a costly one.
As a result, one of your top goals should be to protect the house you bought. While there are many ways you can do this, you should evaluate a home warranty vs. home insurance.
Both are excellent options for protecting a house, but which ones should you get?
As you begin evaluating your options, here is a guide to help you learn the differences between a home warranty and home insurance and why you should choose both.
Home Insurance: Three Things You Must Know
Homeowner’s insurance is a product you can purchase from most insurance companies. It provides a lot of protection for you and your home, and it protects the investment you made into your house.
As you compare home insurance vs. home warranties, here are three crucial things to understand about homeowner’s insurance:
1. Your Lender Requires It
The number one thing to know is that you cannot own a house with a loan and not have home insurance. Lenders will purchase home insurance policies for borrowers if homeowners fail to buy it. Home insurance is a requirement.
Lenders require home insurance to protect their interests in the loans. As a homeowner, your house is probably your most valuable asset. To protect it, you can buy homeowner’s insurance.
While the lender requirement of having home insurance ends when you pay off your loan, it is wise to keep the policy for as long as you own the house.
2. It Protects Your Structure and Personal Belongings
Next, you should understand what homeowner’s insurance covers. Most policies provide coverage for two main things: structure and belongings.
Home insurance protects you if damage occurs to your home or belongings. If the damage is from a covered peril, your policy compensates you for your losses.
You must pay a deductible, but the deductible is often much less than the total damages from a major peril.
3. Home Insurance Does Not Protect You in Every Way
The third essential thing to know is that home insurance does not protect you in every way. It has limits.
Your homeowner’s policy will not protect you from damages caused by normal wear and tear.
It also will not protect you when things break. If your hot water heater stops working, your home insurance does not cover the cost of fixing or replacing it.
You are responsible for all the repairs and maintenance that your home needs, even if you have a home insurance policy. Home insurance is not designed for this purpose.
As you can see, home insurance serves an essential role as a homeowner. Therefore, you should always keep your house covered under a home insurance policy.
Home Warranty: Three Things You Must Know
Understanding what home insurance is and why you need it is vital as a new homeowner, but you might also want to ask, “what is a home warranty?” Here are three essential facts to know about home warranties if you’re wondering:
1. A Home Warranty Fills in the Gaps
A home warranty is very different from home insurance, but it is also very valuable to have. A home warranty fills in the gaps of coverage where homeowner’s insurance lacks.
When you have both, you have protection for just about everything. Home warranties cover the parts of your home that may require repairs, maintenance, or replacements.
If your water heater breaks, a home warranty offers repairs or replacement services for it. If your HVAC system needs repairs, a home warranty covers it.
Home warranties cover major systems, components, and appliances in your home, and these are things that your home insurance does not cover.
2. Home Warranties Protect Your Budget
When you have a home warranty, it lists everything that it covers. When an item on the list needs work, you call the home warranty company and schedule an appointment for services.
You will have to pay a small fee for the service call, but that is it. You will not be responsible for paying the entire bill.
Therefore, a home warranty protects your budget. You can pay for the warranty upfront and never have to pay a hefty repair bill when your systems or appliances need work.
3. A Home Warranty Is Affordable
Buying a home warranty is not expensive. In fact, you’ll pay a lot less for a home warranty than for home insurance.
The actual cost of a warranty depends on several things, and you can ask a company for a quote. The company will base the costs of the age of the home, the types of systems, and the ages of the components and appliances.
The costs also depend on how many appliances and systems you have in your home.
In most cases, though, a home warranty will cost a lot less than the cost of home insurance. Yet, it offers the protection you need.
You can see that a home warranty is essential as a homeowner, even though it is not a requirement by lenders.
Choosing Between a Home Warranty vs. Home Insurance
After comparing the differences between a home warranty vs. home insurance, you should see that these two products are entirely different. While they both offer protection, each provides a different type of coverage.
As a first-time homebuyer, you should consider buying both.
If you have questions about these products, check out our blog. We have a lot of information on these subjects that may help you understand both products a little more.
