What is the Difference Between Homeowners Insurance and a Home Warranty Plan?

Whether you are buying or selling a home, a home warranty could be beneficial for you to consider.

Many buyers choose to purchase home warranties, which average $350 to $500 for a basic warranty with additional coverage that may be added for an average of $100 to $300 more. Buyers appreciate the fact that they can rely on a warranty to pay for repairs during the first year while they are settling into a new home. Even after the first year, it is advantageous to renew your coverage to continue enjoying that same peace of mind.

Home Sellers can benefit in two ways by having a home warranty plan in place. They can purchase a warranty that will protect them while their property is on the market and it can then be transferred to the new buyers.  Not only does the home warranty protect the Seller from untimely costs of repairs if something was to fail during the home selling process, it can also be a marketing tool that will make the home attractive to potential home buyers. This will provide an extra incentive for buyers who are concerned about potential costly repairs, but it is available for the sellers in case an item breaks during escrow. There may also be items discovered during a professional home inspection that can be handled by the buyer after they move it. This could save the seller money and save the transaction from stalling once under contract. It also shows a buyer that the current home owner has properly cared for the home.

Home Warranty vs. Insurance

Newly built homes typically come with a one-year warranty on appliances and systems and a 10-year structural warranty provided for by the builder, but an existing home does not typically come with a warranty.

Your homeowners’ insurance, also called hazard insurance, covers the house itself and your personal possessions in case of a fire, theft or damage, but won’t cover you if your AC fails, your hot water tank breaks or your washer and dryer break down. There may be some cases that both your Home Warranty and your homeowners’ insurance may cover a portion of the same event. One example of this is severe water damage to the home due to a plumbing failure.  If there is extensive remediation that needs to be addressed due to mold, water damaged floors and walls etc., then both coverages will come into play. Again a home warranty usually will cover repair items and homeowners insurance will cover large catastrophic items.

Some homeowners get frustrated by a home warranty because they assume they can hire anyone they want to make a repair and that if something is broken or old they can simply have the item replaced by the warranty policy. Home warranties offer important protection from unexpected repair bills, but it is important to know which items will be covered.

One unique feature that Old Republic Home Protection offers is a cash payout.  Once the initial repairman is sent to assess the issue and report it to the company, the homeowner has a choice to allow the repairman to handle the claim or be paid a cash amount to handle the repair themselves or with a vendor of their choice.  Not all home warranty providers offer this feature but it can be advantageous for a homeowner to accept the cash out option if they have the resources to handle the repair themselves or if able to negotiate the service with a vendor of their choice.

Should You Buy a Home Warranty Policy?

The annual cost of a Home Warranty plan is so inexpensive, the real question you should ask yourself is “why shouldn’t I buy a home warranty?”  As with any legal agreement, you should read the terms and conditions of the optional warranty plans to make sure you understand what is covered, the limitations of your policy and any fees you will need to pay.

Visit the Old Home Republic to get a free quote and learn about the different plans of coverage they offer at www.orhp.com.

Feel free to reach out to us with any additional questions or help with determining the best coverage for you.

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