How to “Insure” Your Home is Protected

By on December 5, 2014. Posted in , . Tagged as , .


The difference between Home Owners Insurance and a Home Warranty

There are few real estate terms as frequently confused as a Home Warranty Policy and Homeowners Insurance Policy. While they sound synonymous, they actually cover very different things

Homeowners Insurance
Homeowners insurance covers damage and loss caused by something (fire, wind, hail, fallen tree, etc., as well as by theft and vandalism) and is an on-going payment – like your car insurance. Coverage specifics and rate vary from company to company. Homeowners Insurance is typically required by lenders to protect their interest in the property, but is an excellent idea for every homeowner – even if you’re not financing the property.

Home Warranty
A home warranty, also known as a residential service contract, covers the appliances in your home at the time of purchase for problems that could be caused by normal wear and tear during the coverage period (frequently one year). Coverage can vary from company to company, so it’s important to choose a policy that is tailored to your home. Most policies will charge a deductible and/or service fee when you make a claim.
The home warranty is purchased by a one-time payment, typically made by the sellers of the property. The amount the sellers will contribute is determined in the offer. While most buyers opt to choose a policy no more expensive than the sellers agreed contribution, they are always welcome to purchase additional coverage at their own cost. The policy is typically ordered by the title company a week or two before closing.

Note: This entry is specially tailored for Texas – while much of it applies elsewhere, certain specifics may vary from state to state.