Buying a second house? This guide will teach you about the important financial considerations you need to think about.
It is imperative to protect your new home and your belongings, but it can be hard to justify paying for an intangible product after you have invested so much money in purchasing a new house. Our friends at Openlistings.com recently shared some interesting information regarding homeowner’s insurance and home warranty that might help you understand the importance of these protections and why you need them.
What Exactly is Home Insurance?
Home insurance, also known as homeowner’s insurance, provides you with financial protection against disasters. It protects the house itself and everything in it, as well as provides liability coverage in case anyone injures themselves in your home or on your property. Getting home insurance must happen before the close of escrow, and lenders will insist upon it.
What Does Homeowner’s Insurance Cover?
Your policy covers both damage to your property and legal responsibility for any injuries you or your family cause to other people in the house.
The structural protection normally includes damage or destruction due to fire, hurricane, lightning, hail or other disasters outlined in your home insurance policy.
Most policies will not pay for damage caused by earthquakes, floods or lack of proper maintenance. You can purchase additional coverage or a separate policy for those. It is also important to make sure detached buildings like garages and storage sheds are included in your policy, even if that costs a little extra.
Your personal belongings inside the home, including furniture, electronics, tools, and clothes are covered for theft and other insured disasters, but high-end items like jewelry, art, and collectibles will require additional coverage if you want to insure them for their full appraised value.
A good rule of thumb is to buy enough coverage so you can rebuild your house if disaster strikes.
What’s a Home Warranty?
A home warranty typically provides coverage for air conditioning units, heating furnaces, and other home appliances/systems like the oven or range if they fail due to normal wear and tear. Additional coverage can be purchased to cover a swimming pool and spa pumps.
It’s common practice for a seller to pay for a home warranty, but a home warranty isn’t always necessary and can just as easily be bought at a later date.
You have two choices when insuring your home and belongings.
If you opt for “actual cash value,” you receive the amount of money needed to repair or replace your home after depreciation is factored in. With a “replacement cost” policy, your home will be restored to “like new” condition using materials of similar quality, without considering depreciation.
If you have an older house with rare moldings and hard-to-find fixtures, you should insure your home for 80% to 90% of its replacement cost.
The liability protection of your homeowner’s insurance policy includes such accidents as someone slipping and falling on your driveway, or your dog biting a visitor in your living room. It covers you against lawsuits for bodily injury or property damage that you or your family members (and pets) cause to other people.
Additional Types of Home Insurance Coverage
Certain considerations and requirements come with homeowner’s insurance, depending on where your dream home is located, such as the history of claims in your neighborhood and on your property, may make home insurance difficult to obtain; i.e., if you chose an area prone to wildfires or mudslides. In California it is required
Deciding whether you need a home warranty is a less pressing matter, but if you’re closing on a home or thinking about making an offer soon, it’s important for you to find the right home insurance provider.
Finding a Home Insurance Provider
Need help finding the best insurance rates so you can save money and close your loan quickly? Open Listings recommend Matic, which helps you compare up to 8 options and get a quote online.
TL;DR: While first-time homebuyers often get home warranties and home insurance confused, the reality is that it’s not an either/or situation. You have to have home insurance before you close on your new home, but a home warranty can be bought any time.
Are you looking to buy a home in Kansas City? Let our team help guide you through the entire process. Give us a call today! You can reach our team at 913.521.8806. You can also come visit our office at 5000 W. 135th St. Leawood, KS 66224.