THE DIFFERENCE BETWEEN HOME WARRANTY & HOME INSURANCE
When purchasing a new home, it’s important to do in-depth research on all facets of the home buying process. One thing you’ll need to understand is how to best protect yourself and your investment if anything were to go wrong. In this article we’ll outline the difference between a homeowners insurance policy, and the coverage provided by a home warranty.
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 not covered under the typical policy. 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 the insurance comparison website Polygenius, the average annual cost of a homeowners insurance policy ranges between $681 and $2,164, 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.
Special considerations for buying homeowners insurance in Colorado
We’re happy to report that Colorado is not a high-ranking state for home theft. And nationally, property crime rates continue to drop, even in large cities like Denver and Colorado Springs. However, Colorado is known for being the second highest-rated state in the nation for homeowners insurance catastrophe claims because of Colorado’s harsh weather, making the average cost of Colorado homeowners insurance $1,495, several hundred dollars above the national average of $1,211. While home insurance isn’t required in the state of Colorado, mortgage lenders almost always require some sort of insurance to protect the amount of money owed on the loan. To make the best decision about which homeowners policy is right for you, it’s important to take into consideration what region of the state you live in, and which weather events are common in that area, including hail, snow and even wildfires. To learn more about the specifics of buying home insurance in Colorado, check out Bankrate’s: Best Colorado Home Insurance Companies 2020.
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.
Working on getting your financial house in order? Learn how to Prepare for the Cost of Buying a Home, and understand the Costs and Benefits of an HOA.
Questions about home warranties or home insurance? We’d love to share our expertise!