We are seeing an unprecedented number of first time home buyers in Chattanooga this summer. There are so many moving parts and new terms to learn when in the home buying process. It can be confusing. Buyers are must due their due diligence and educate themselves on all the facets of the home buying process. One key thing you’ll need to understand is how to best protect yourself and your investment if anything were to go wrong such as a faulty toilet or tornado (believe me, both can be equally devastating). Here is a little information to clarify the key differences between home insurance and home warranty.
Homeowners insurance pays for any accidental damages and loss caused by fire, lightning strikes, windstorms, and hail, however, flood is typically not covered in a standard policy, although additional flood insurance can be purchased. Most policies also cover the replacement of personal property in case of theft or damage, as well as liability if a person were to get injured in your home or on your property. According to a May 2020 Business Insider article, the average annual cost of a homeowner’s insurance policy in Tennessee is $1,100. The cost varies based on the price of the home and the contents included. Most agents recommend insuring contents for 25% of the value of the home and having extra riders for items of high value such as art, jewelry, guns, etc. The mortgage lender will usually ask you to obtain a policy before the mortgage is issued and it must be presented at or before the closing. Research should be done into the history of the company you choose, especially the experience of people who have had to use their policy. It is important 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 depending on the type of loss that has occurred.
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. These repairs include but isn’t limited to HVAC, electrical, or plumbing components, kitchen appliances, and your washer and dryer. These warranties take over after manufacturers warranties, which are usually just 12 months, have expired. With a home warranty, you are required to pay a yearly premium, 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 natural disaster or fire.
It is important to make sure your largest investment (your home) is covered if there is damage, whether it is man made or a natural cause. The proper home insurance is an absolute must and a home warranty is often a good investment, especially when purchasing a home with appliances that are not brand new. Want more clarification on the terms and processes of purchasing a home? We would love to schedule a consultation with one of our first time home buyer experts.