Q: What Is the Difference Between a Home Warranty and Home Insurance?
A: When you are buying a new home, your real estate agent may encourage you to request the seller to buy a home warranty plan for the property. With a warranty on the home, you may wonder why home insurance is necessary. A home warranty usually pays for repair work related to wear or tear or general usage. For example, it may cover plumbing repairs or HVAC service. A home insurance policy, on the other hand, usually pays for damages related to major perils. According to this Greenville insurance agency, these perils may include fire, severe weather, theft and more. In many cases, new homeowners may benefit by having both a home warranty and a home insurance policy because these two coverages offer different types of protection.
Q: What Are the Different Options for Home Insurance?
A: If you have started shopping for a home insurance policy, you may be discovering that there are various types of coverage available. A standard policy may include benefits for liability expenses as well as for major repair work to the home. However, you may also opt for coverage related to flooding, earthquakes, mold growth and more. Some homeowners can buy coverage to replace the contents of the home, such as if a fire destroys all of your personal belongings. Displacement costs, such as if you need to live in a hotel temporarily, may also be covered by some policies.
Q: What Are Reasonable Coverage Limits for Home Insurance?
A: Buying home insurance is something that is rarely done in most cases. Because of this, you may understandably be wondering how much coverage you need. First, understand the inclusions and exclusions for each coverage type available that you want to buy. Second, pay attention the compensation rules for each coverage type. For example, if your house burns down, the insurance company will pay to replace it up to the limit of your coverage. However, because the land is not destroyed in a fire, you do not need to insure the value of your property. The replacement value that takes into account new construction or building costs in your area must be determined.
Q: What Should the Deductible Be?
A: A home insurance deductible is paid each time that you file a claim against your coverage. Your insurance company may establish a minimum deductible amount that you can request, but keep in mind that a lower deductible will create a higher premium payment. A common deductible amount is between one to two percent of the replacement value of the home. Before you request a higher deductible, remember that the deductible amount can decrease the benefits of your coverage. For example, if your deductible amount is $4,500 and you have $3,000 of roof damage, it is not beneficial to file a claim.
Q: Why Does the Home Insurance Premium Need to Be Paid Up-Front?
A: In most cases, you will pay your entire home insurance premium for a year up-front. Your mortgage company may also establish an escrow account that begins collecting money each month for the following year’s insurance premium. Insurance companies usually require the premium to be paid in full up-front as a matter of policy. Because of this, the mortgage company wants to ensure that your escrow account has enough money to pay the full premium amount at the next renewal date. Remember that any unused amount will be refunded to you if you change providers or sell the home.