As a title company, we constantly advocate the importance of obtaining owner’s title insurance during your home purchase to protect yourself against ownership claims on your property. We’ve even argued that it’s one of the most important steps you can take during a real estate transaction; however, there are other safeguards that homeowners should consider in order to protect their property, such as homeowners insurance and a home warranty. In this article, we’ll explore these two types of insurance and how they can protect you from unpleasant surprises and unexpected costs.
What is Homeowners Insurance and What Does it Cover?
Homeowners insurance is usually purchased at the time of closing. Even though it’s not legally required, if you’re financing your home, the lender will require that you obtain homeowners insurance before they agree to provide financing. This protects the lender in the event your home, which is being used as collateral for the loan, is damaged or destroyed. While “acts of war” or “acts of God” such as earthquakes and floods are usually not covered, fires are. Depending on where your home is located, your lender may require a separate policy that covers loss or damage due to an earthquake or flood.
A homeowners insurance policy typically covers losses and damage to the structure as well as personal belongings within your home including furniture, appliances, and other items inside the home. In addition, homeowners insurance often covers hotel and other lodging-related expenses incurred while your home is being fixed or re-built. In some cases, your homeowners insurance will cover legal and medical bills if someone is injured on your property.
Homeowners can choose their insurance on their own during the mortgage application process and can compare different plans, but it’s recommended that you speak with an insurance expert who can help you choose the right policy and coverage based on your needs. The payments for homeowner’s insurance are usually collected in the monthly mortgage payments and held in your escrow account and paid on your behalf by your lending institution.
Here’s a list provided by NerdWallet of the best-ranked homeowners insurance companies as of September 2023.
Why Homeowners Should Consider a Home Warranty
While it’s difficult to avoid purchasing homeowners insurance, buying a home warranty is a personal choice. A home warranty is a service contract that covers the cost of maintaining household systems or appliances for a set period. There are many different plans for coverage and some home warranties offer a discounted price for the first year of your contract. The average cost is between $430 and $820 a year and typically includes a service charge ranging between $35 and $70 for each item needing service. Home warranty companies work with home service providers like plumbing or electrical contractors who are assigned to assist you at your home after an assessment of the damage is made. Most home warranties cover standard appliances such as water heaters, stoves, refrigerators, HVAC, plumbing, and electrical systems. Home warranties are especially helpful for buyers who are purchasing a home with older appliances, so make sure to ask the seller when house hunting about the age and performance of household appliances and systems. Beware of appliances or systems in a home that could be denied service by a home warranty as the providers do have the right to refuse service should the original owners have improperly maintained or installed the items.
Check out Forbes’ favorite home warranty companies as of September 2023.
The Takeaway for Homeowners
In conclusion, while title insurance is undeniably a critical safeguard for your home, it’s only one component of a comprehensive strategy to protect your home. We’ve peeled back the curtain on the importance of homeowners insurance, a must-have that not only provides financial protection but also keeps you secure within the four walls of your sanctuary. Additionally, a home warranty, though optional, can be a lifesaver when it comes to maintaining your household systems and appliances. Remember, choosing the right blend of insurance and warranty protection can help you weather unexpected storms that may affect the joys of homeownership. So, as you navigate this homeownership adventure, make sure to keep your castle fortified with title insurance, homeowners’ insurance, and a trusty home warranty by your side. Your home deserves nothing less than a fortress against life’s unexpected surprises, ensuring your peace of mind as you settle into the cozy embrace of homeownership.