Ignite FB Tracking PixelHow Does Homeowners' Insurance Compare to Home Warranties and Mortgage Insurance? - Eunice Pearson
Century 21 Mountain Lifestyles

How Does Homeowners' Insurance Compare to Home Warranties and Mortgage Insurance?

by Eunice Pearson 10/03/2021

Homeowners’ insurance is a popular and widely recommended service for homeowners. It provides protection from certain types of incidents and can cover damage and losses to your property. It can also cover certain furnishings and assets besides the actual structure of the home. If you’re curious about homeowners’ insurance, how it works and how it compares to other forms of financial protection for homebuyers, we’ve put together the basics to help.

Homeowners’ Insurance Coverage

Homeowners’ insurance provides financial coverage for both interior and exterior damage to your property. It can also cover damage to your individual assets, as well as cover liability for injuries that somebody might get while on your property. Like all insurance, pay a deductible when you submit a claim. This deductible amount is your out-of-pocket expense for making the claim and the amount varies from one provider to the next.

Homeowners’ insurance policies have liability limits, which essentially cap the amount of coverage offered at a specific dollar amount. A common liability limit for homeowners’ insurance is $100,000, but you can often choose a higher limit as an option in your policy.

Homeowners Insurance vs. Home Warranties

Homeowners’ insurance might seem like coverage for everything in your home, but it still differs from home warranties. These warranties offer other specific coverage for repairs or replacement of home appliances like dishwashers, kitchen ovens and ranges and water heaters. Home warranties also include major systems in the homes like electrical, plumbing and central air. Home warranties provide extra peace of mind for homeowners who want to avoid expensive repair jobs.

Home warranties differ from homeowners’ insurance for appliances and systems because they cover repairs or replacements needed because of regular wear and tear. While a homeowners’ insurance policy might cover appliances damaged in a fire, it won’t provide you any coverage if your appliances break down over time because of regular use.

Homeowners' Insurance vs. Mortgage Insurance

Mortgage insurance is another type of insurance policy for homeowners that can be confused with homeowners’ insurance. Not everyone needs mortgage insurance, but sometimes a bank will require it if you are making a lower than usual down payment on the home. If your down payment is less than 20% of the home price, the mortgage lender considers you a higher risk investment. Therefore, you’ll need to supplement your down payment with mortgage insurance in order to protect the lender in case you default on your loan.

You can buy a homeowners’ insurance policy regardless of your mortgage terms and down payment amount. The major difference between the two is that homeowners’ insurance protects your interests and the mortgage insurance protects the lender. Both are regular expenses for you to pay but only homeowners’ insurance will provide you with any direct financial coverage.

Every homeowners’ insurance policy is different as is every provider. If you’re looking for homeowners’ insurance, it’s important to research your best option. Sometimes, you can add homeowners’ insurance onto existing policies. If you have car insurance, for example, it might be worth checking with your provider to see if they provide a special discounted deal. Regardless, the key things to remember are the differences between homeowners’ insurance when compared to mortgage insurance and home warranties. Knowing the facts will help you get the best coverage.

About the Author
Author

Eunice Pearson

I have lived in and loved Western North Carolina since 1964 and I think it is the greatest place to live. I have been in real estate since 1985 and I enjoy helping other people find homes in this area. I am familiar with Buncombe and Henderson counties primarily and some of Haywood and Madison counties. These are the counties that surround Asheville and Hendersonville. Tell me what setting you like and I will help you find it. 

If you have a house to sell, I can help you there also. Since I show many houses, I am familiar with the values and with what buyers are interested in. I can help you promote your house to the right buyer. When I started 35 years ago, the paperwork was limited and simple, the mortgages had set qualifications and very little variance. It is so much more complex now. I can help you thru the maze. 

There are mortgages now for almost everyone. Let me help you find the right lender. Very little down is required. There are some 100% mortgages and others with as little as 3%. There is a program that will fit you.