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. Read on to learn more about the differences  between home insurance versus home warranties.

Home Warranties/Residential Service Contracts

A home warranty, also known as a Residential Service Contract, 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. These are items that typically would NOT be covered by Homeowners Insurance.

With a home warranty, you are required to pay an annual 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 fire or other disaster. Read more about what’s covered by most home warranties and then check out this helpful Q&A from Lorna Mello, chairman of the Texas Home Service Contract Association.

In our real estate market, it’s common that Sellers cover the cost of all or part of the Buyer’s Home Warranty coverage for their first year of ownership, but it’s up to you and your Realtor to negotiate the agreement.

Home Insurance

Homeowners insurance pays for accidental damages and loss caused by fire, lightning strikes, windstorms, or hail, however, damage from earthquakes and floods is typically not covered. It also covers the replacement of personal property in case of theft or damage plus liability if a person were to get injured in your home or on your property. According to Insurance.com, the average annual cost of a homeowner's insurance policy in Texas is $1,945 and the lender usually asks you to obtain a policy before the mortgage is issued. 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.
The Texas Department of Insurance has very helpful resources on their website to review.

Get in Touch

Have more questions about homeowners insurance, home warranties, or just the buying process in general? Let’s talk!