Homeowner’s Insurance

Homeowner’s insurance covers against damage and loss caused by fire, wind, hail, fallen tree and other natural acts, as well as by theft and vandalism. Comprehensive insurance policies also cover damages from accidental harm that occurs on the property, especially if it involves a defect in the property. An example of this would be a slip and fall or medical injuries caused by an icicle that falls from a roofline.

Homeowner’s insurance policies are required by most lenders, since it protects their financial interest in the property if anything major should happen, such as a fire or substantial storm damage. The natural acts, or hazards, covered by these policies vary. For example, some policies cover storm damage, but will not cover hurricane damage. Others will not cover damage by any “act of God” including earthquakes or floods. However, coverage can be purchased separately as an add-on to their homeowners insurance policy. Many lenders require this additional coverage if the home sits in a high-risk area, such as mandatory flood insurance for homes located along a river.

A home warranty is a policy generally purchased by the seller prior to or at closing on a home purchase though a buyer could purchase one as well. It covers the major systems and appliances of a home and repairs or replaces them when they break during the coverage period. The definitions of major systems and appliances vary from policy to policy, but they typically entail heating and air, plumbing, electrical, hot water heaters, dishwashers, stoves/ovens and garage door openers. If the refrigerator was in the home when it was purchased or before the policy went into effect, it is covered as well.

Home warranties are optional, but many sellers purchase them as reassurance for buyers that any repairs or replacement of worn components in the home will not come out of their pocket. This is especially valuable in areas where resale homes are in strong competition with new homes, since the out-of-pocket maintenance cost for a resale will be the same as for a new home. Home warranty companies keep a set group of trusted local contractors ready to take care of repairs. The homeowner simply calls the warranty company about the issue and the company calls one of its contractors to come out and assess the situation. The contractor then makes repairs or replaces broken parts if repairs cannot be made. The warranty company pays the contractor directly and charges the homeowner a small fee designed to minimize nuisance calls.

Home warranties are not necessarily all-inclusive. Some cover items such as pools or septic systems as part of their coverage, while others offer coverage for those same items at an additional cost. Other policies do not cover them at all. A seller or homeowner who is looking to buy a home warranty should read the fine print on what is covered and any conditions on that coverage before purchasing the policy to make sure it covers all of her needs.