Do You Need Homeowners Insurance or Home Buyers Insurance? 6 Things To Consider
No matter where you own a home in America, having homeowner’s insurance is a must. Whether you live by the ocean, in the windy Great Plains area, in the desert, or even near a volcano, having insurance means having peace of mind. We’ve compiled everything you need to know about homeowners and buyers insurance.
The question of what insurance is can be hard to answer. Factors such as the type of insurance, where you’re trying to buy it, what you’re trying to buy it for, and even who and how old the would-be buyer is all play a role in answering that question. It also doesn’t help matters that the word ‘insurance’ can mean different things, to not just different people but even different insurance companies, each of which has its own definition of the term.
A good place to start when talking about the subject of buying insurance for your home would be the difference between homeowners’ insurance and buyers insurance. There are major differences in what sort of coverage you would get with homeowner’s insurance or buyers insurance. Knowing those differences is important, especially when trying to find the best insurance to fit your needs as a homeowner.
To begin with, think of homeowner’s insurance as you would think of insurance for just about anything else: Your car, to use a good example. At its most basic, homeowner’s insurance is property insurance that provides financial recompense in the event of losses or damages to your home and property.
Another thing that homeowner’s insurance does is provide you with a degree of liability coverage in the event there’s an accident in your home or on your property. While most states in America don’t require homeowner’s insurance by law, an important caveat is that most banks and lending institutions that issue mortgages and loans do.
When requesting a mortgage from your bank or the financial institution of your choice, they are going to want proof of insurance. Therefore, it’s necessary to have one before the other.
Buyers Insurance, or a home warranty as it is also called, is very different from typical homeowner’s insurance. To begin, think of buyers insurance like you would the manufacturer’s warranty on your car, which covers damages or defects. Buyers insurance does much the same. The house itself is effectively warrantied, and damages to the house are covered by your warranty.
While no two policies are exactly alike, they all generally cover the same things: the structure and exterior, interior and fixtures, and systems such as the heater and air conditioners. Buyers insurance is generally meant to provide coverage across many aspects of your home, as well as provide financial assistance if and when repairs on the covered portions are needed.
A good example of coverage here would be warranty coverage on your home’s tank water heater. If the water heater breaks or otherwise stops working for some reason, your buyers insurance will cover the cost to repair or replace it.
6 Things to Know About Homeowners Insurance & Buyers Insurance
1. Read The Fine Print
Before you ever sign the dotted line for a mortgage or your insurance policy, it is important that you read and understand anything before you sign it. I.e., the fine print. By reading the fine print and knowing exactly what your new policy does and does not cover, you’ll be more knowledgeable when it comes to the ins and outs and the dos and don’ts of your new policy.
For example, say you’ve had your insurance policy for a while, and your property suffered flood damage as a result of a nasty storm. However, your generic policy has reduced or perhaps even no coverage for damages as a result of flooding, and you didn’t realize this beforehand when you signed. As a result of not reading through your insurance policy before signing on the dotted line, you’re essentially left high and dry.
Likewise, buyers insurance has its own pitfalls and caveats. As we explained previously, buyers insurance doesn’t usually cover the contents of your home or property, just the property itself. Another example we can give is again in regards to HVAC systems.
While it is indeed true that buyers insurance can and will cover the cost of repairs or replacement, it’s also true that they will often only cover the cost up to a certain amount, leaving you to pay for the remainder out of pocket if such a threshold is met. Also, they may only cover repairs made by licensed professionals or even a company they themselves contract with.
Deal With A Reputable, Trustworthy Insurance Expert
While reading the fine print is always important, choosing an expert you can trust is also important. Having an expert that’s on your side can make purchasing insurance much easier and can give you greater peace of mind.
2. Location, Location, Location
If you’re at all familiar with insurance policies of any kind, then you should know that they can vary dramatically in all sorts of ways. And one of the biggest factors at play in regards to insurance policies is location. Whether you’re still house hunting or have already picked out a home of your dreams, knowing how your insurance policy or home warranty will be shaped as a result is important. A good place to start is to discuss what types of damages or events a given policy will protect against, depending on your location.
For example, if you live near the ocean, the odds are good that your insurance rates will be much higher, especially in areas that are prone to flooding. Coastlines, in general, are oftentimes more expensive locations to have homes, if only in terms of the insurance. Whether it’s seasonal hurricanes, thunderstorms, or rising sea levels, insurers will charge a premium for waterfront property.
On the other hand, you might find your rates are much more favorable in areas that are less prone to storms and extreme weather. Much the same goes with other forms of damage: You might find that your insurance provides more or better coverage and at a cheaper rate if the damage is less likely to happen.
A good place to describe this would be to talk about tornado and severe weather protection. For instance, it might be cheaper in a mountainous state like Colorado, while being far more pricey in a flat state like Kansas that is extremely prone to dangerous weather such as thunderstorms and even tornadoes.
3. Age Can Play A Part
It might surprise you, but many insurance companies take age into consideration when creating your insurance policy. Generally speaking, the younger you are, the more you might pay for either homeowner’s insurance and buyers insurance. While this fact is mainly associated with car insurance rates, it is also often relevant in regards to home insurance too.
Older homeowners may be considered less prone to risky behavior or make decisions that potentially jeopardize their home.
4. Liability and Lawsuits
Depending on the terms of coverage of your homeowner’s insurance or buyers insurance, you can be protected from legal damages as a result of accidents or injuries. While liability coverage is generally its own thing that warrants its own topic, it also warrants mention and discussion here.
For example, think about what would happen if someone were to have an unfortunate slip near your outdoor pool and injure themselves. Or, if they tripped and fell down a flight of stairs in your home, injuring themselves in the process. Without liability coverage, you could be held accountable for any medical costs they might incur and would then have to pay damages as a result.
If worst came to worst and someone were to sue you as a result of an injury they suffered in your home, you would be protected as well. Liability coverage can oftentimes provide a degree of security against personal injury suits as well as provide coverage for both medical bills and lost wages. Finally, in the case of the worst happening, if someone were to die on your property, liability coverage can help provide a measure of protection against wrongful death suits.
5. Acts of War and God
Acts of War and Acts of God are often excluded from the majority of normal insurance policies and often require additional insurance to cover them.
Acts of War
Acts of War are exactly what you would expect. This type of coverage protects against instances of riots, strikes, terrorism, and even the worst-case situations of invasions and coups. While most of these events are highly unlikely to happen in America, the threats of terrorism and potential for riots should give you pause, especially if you intend to buy a home in a suburb of a metropolitan area.
Acts of God
Acts of God are another thing that merits discussion. As the name would imply, they’re rare acts that happen outside of the scope of human control. Things such as earthquakes, tornadoes, hurricanes, and even tsunamis all fall under the definition of an Act of God. Depending on the scope of your homeowner’s insurance, one, more or even all of these might fall under your policy, depending on where you live and what threats the environment around your home may pose.
For example, as recent news stories from California shows, that state is very prone to major wildfires and forest fires, as are the states of Oregon and Washington. As a result, the cost of wildfire coverage tends to be very high in these states. Much the same goes for earthquakes; due to occupying a portion of a major faultline, the state of California is at risk of major earthquakes.
On the flip side and the opposite coast, the East Coast and Gulf Coast states are at a much higher risk of hurricanes than other parts of America, and as a result, pay a higher premium for insurance coverage. Ask any long term resident of Florida or the Gulf Coast states, and they’ll tell you all about hurricane preparedness.
6. The Price Of Peace Of Mind
If you’re still reading so far, you’re probably seriously considering buying homeowners or buyers insurance for your home and your family. So now would be a good time to talk about getting what you pay for. As with most other things in life, having peace of mind can come at a steep price.
Comprehensive coverage for all of life’s unexpected incidents can be expensive, so knowing how to save money and where can make all the difference in the world. A good place to start talking about saving money on your homeowner’s insurance or your buyers insurance plan would be in knowing what disasters are most likely to occur and affect you and your family.
Know What to Prepare for
If you live in an area prone to tornadoes, or earthquakes, your policy should reflect this. The same goes for someone who lives on the Gulf Coast or the East Coast—not having protection against hurricanes, or other Acts Of God is riskier than it might be in other areas.
Many buyers insurance policies come with set dollar limits for different aspects of the home that they cover. Home repairs may be covered only up to a set dollar amount, beyond which you have to make up the difference out of pocket. A policy with higher set dollar amounts will have much better coverage and look much more favorable on paper but will be more expensive as a result.
Talk To An Expert: Absolute Choice Insurance
It should go without saying that insurance is an absolute must in this day and age, especially for homeowners. Whether you are seeking to buy a conventional homeowner’s insurance policy or a home warranty policy, knowing what to look for and what to buy can make all the difference in the world. Ultimately, whatever plan you do settle on should be custom-tailored to the needs of you and your family.
To learn more about homeowner’s insurance, buyers insurance or home warranties, or to get started with the policy that’s right for you, contact Absolute Choice Insurance today:
South Florida Phone: 305-275-1777
Central Florida Phone: 407-344-4444