Home Buyers Insurance vs Homeowners Insurance: What’s the Difference?
A house purchase represents a commitment to a sound financial future. It is a way to transform your monthly rent expense into an equity payment that will become an important asset. But, like any long-term commitment, the uncertainty of a mortgage can be a cause of anxiety. Fortunately, there are many buyers insurance policies available that provide you with protection against many of the uncertainties that the future might hold. In this article, we will discuss the difference between home buyers insurance and homeowner’s insurance to help you better plan your insurance strategy.
Why Do I Need Insurance?
It is never easy to plan a yearly budget, and sometimes it can be a challenge to cover the cost of standard household bills. Everybody does their best to be diligent and to put some money away for an unexpected situation, but it is difficult to plan for everything. Life has a habit of sneaking up on you and giving you a surprise. Things like car troubles, an illness, or job loss can change your financial situation overnight. A reasonable insurance policy allows you to have a plan in place to minimize the financial burden when you encounter unexpected challenges.
Insurance is protection against uncertainty. For a minimal yearly premium, you get the peace of mind that if something unexpected happens, you will have access to the funds and time necessary to get back on track. One of the great things about insurance is that insurance companies have been around for so long that they are very good at anticipating anything that might befall you. A good insurance policy is like a wise advisor that protects you against things you didn’t even know posed a threat. There are many ways that insurance can benefit you.
Insurance Can Protect Your Budget
For most people, their mortgage payment is their largest monthly expense. Your house is your home, and it is where you enjoy time with your family and make your memories. Your home becomes an integral part of who you are. When purchasing a home, it is important to assess your income stability so that the amount of the mortgage payment does not become burdensome. It is also desirable to plan for enough financial flexibility so you can enjoy trips and stress-relieving vacations.
Insurance Can Protect Your Investment
All investments have their inherent vulnerabilities. The stock market undergoes frequent market fluctuations, and it is possible to lose everything you own in a market crash. A home will retain value independently of the market, but a physical property also has its vulnerabilities. Your house could suffer damage from fire, flooding, storms, and even burglary. Some of these risks are statistically unlikely, but when you consider that your mortgage will be over a fifteen or thirty-year period, the chances of suffering some kind of devastating event become more pronounced.
Home Buyers Insurance vs. Homeowner’s Insurance
Fortunately, there is a lot of flexibility in home insurance plans, which allow you to purchase the coverage that makes the best sense for you. An easy way to think of home buyers insurance is that it is the insurance that will protect your budget. Homeowners insurance is the insurance you purchase to protect your investment. When you consider purchasing a home, it is important to be familiar with both terms and understand the options available to you. Your overall insurance strategy should provide the protection you need at a cost you can comfortably afford.
Homeowner’s insurance is what makes it possible to obtain a mortgage. Home mortgages are some of the best forms of loans available. If you have a good credit score, it is possible to get a mortgage at a very affordable rate. The primary strategy for acquiring wealth is to pay as minimal an amount of interest as possible. Every dollar that you pay in interest represents a dollar that you aren’t able to contribute to your personal asset portfolio. To get a mortgage, banks require homeowner’s insurance to protect the value of the investment.
Homeowner’s insurance is so important that it’s usually included in your monthly mortgage payment. As part of your mortgage agreement, banks will often collect the funds necessary for your homeowners premium and make the yearly payment. Banks take this step to ensure that your homeowner’s insurance is up to date, which ensures that the collateral for the mortgage is protected. This provides the bank with security that they will be able to recuperate the rest of the loan amount if the house is destroyed, or the borrower is not able to make payments.
The Fundamental Coverages
There are many coverages that can fall under the blanket of homeowner’s insurance. When you are purchasing a house and selecting your homeowner’s insurance, it’s important to have a clear and precise idea of your specific coverage. It is important not to shop for homeowner’s insurance on price alone because cut-rate insurance can leave you with inadequate coverage that can be disastrous for your financial security. You can use the requirements of your bank as a benchmark, but you have the option to select more substantial coverage if it better suits your needs.
Homeowner’s insurance covers losses and damages to the home and also covers losses and damages to your assets inside the home. The coverage will provide funds to repair or replace damaged property. Standard homeowner’s insurance does not usually cover damage caused by floods or earthquakes, but these coverages can be added at the discretion of the buyer. As a general rule, if the bank is willing to give you a mortgage based on the coverage, you are probably well-protected. However, it is important to consider your personal finances beyond the requirements of the bank.
Additional Benefits of Homeowner’s Insurance
Homeowner’s insurance also usually offers some personal liability protection. This portion of your insurance protects you if you are found legally liable for injury to another person or their property. It also offers you some protection from financial consequences if your pets injure another person or their property. These protections extend to cover funds necessary for your defense and any fees you might be found responsible for paying.
What Are the Limitations of Homeowner’s Insurance?
Homeowner’s insurance is just like your car insurance in that it places a limitation on the liability amount. Usually, the maximum coverage is around three hundred thousand dollars, but the policy coverage can vary by region and by the insurance provider. Buyers can also elect umbrella coverage that will provide a million dollars or more in coverage for an additional cost. Homeowner’s insurance premiums can also be lowered by accepting a larger deductible.
What Does Homeowner’s Insurance Cost?
The average homeowner’s policy in the United States costs around a thousand dollars a year. However, the rates vary based on geographic location, the price of the house, and other factors. Policies can also become more expensive if the buyer elects to add additional coverages.
Home Buyers Insurance
Home buyers insurance represents an additional form of coverage that provides you with financial protection if your appliances fail because of normal use. Home buyers insurance is an important consideration, particularly if you are purchasing an older home with many appliances that are approaching the end of their lifespan. Your home buyers insurance will provide you with financial protection to repair or replace expensive appliances and will, sometimes, even organize the repair service with the best possible technicians available.
Home Buyers insurance represents one of the best ways you can protect your budget. Some appliances can be very expensive to repair or replace and can put an enormous financial strain on a family. If you happen to lose your job and then you have the additional unfortunate luck of having your furnace go out, you might find yourself unable to keep up with your financial obligations. The minimal cost of home buyers insurance gives you peace of mind when you are preparing your yearly budget that there will be funds available for unexpected expenses. Here are some items covered by buyers insurance.
The cost of repair work on a home furnace alone often justifies the cost of a buyers insurance policy. If you live in a cold climate and your furnace fails, your pipes could freeze and cause very expensive damage. If the mainline bursts and freezes, your house could become flooded. This kind of damage might not be covered by your homeowner’s policy. Buyers insurance helps ensure that you can get your furnace repaired quickly.
Hot Water Heaters and Plumbing
Older homes will eventually develop issues with their plumbing and hot water heaters. Plumbing issues can cause water to leak into your home, which might result in rot, mold, and other problems. Hot water heaters periodically need their heating elements replaced, and the tanks also go bad over time. Although, with home buyers insurance, you might be tempted to delay reparations, which can result in further damages and expenses.
Home buyers insurance also typically cover items such as washers, dryers, refrigerators, and stoves. If these items should fail, it could have an extremely detrimental effect on your quality of life. Your insurance policy ensures that any failed appliance will be attended to promptly and professionally and either repaired or replaced at a fraction of the price.
When Does Home Buyers Insurance Make Sense?
If you are purchasing a previously owned home, it makes sense to explore the option of home buyers insurance. Usually, a home inspector will examine the property and inform you of obvious concerns prior to finalizing your purchase. However, a home inspector is only able to assess how the appliances operate on the day of the inspection. If you are purchasing a home with a lot of appliances that are approaching their lifespan, it is a very good idea to consider carrying a home buyers insurance policy.
If you are purchasing a brand new home that has never been occupied, you need to evaluate the builder’s guarantee that comes with the property. Also, if you are purchasing new appliances, you should check to see how long they are covered by the manufacturer’s warranty. Remember, if you are purchasing a new house with new appliances but are the second owner, the warranty might not apply to you, and you should consider additional insurance.
What Does Buyers Insurance Cost?
The policy price of buyers insurance varies by factors that include geographic region, age of the house, age of the appliances, and the provider. The average cost of a buyers insurance policy is around four hundred dollars a year. You are usually able to pay this as either one, upfront, lump sum, or you can divide it up into a monthly premium. Buyers insurance also usually includes a service fee cost that might be between twenty-five and fifty dollars per visit.
Keep in mind; you are likely to incur costs from repairing appliances within your home at one time or another. If you are considering buyers insurance, go back through your credit card statements and add up all the appliance-related fees from the last two or three years. In most cases, you will find that the cost of buyers insurance is less than the cost of paying for issues as they arise.
Conclusion – The Difference Between Buyers Insurance and Homeowners Insurance
Homeowners insurance is like the liability insurance on your vehicle. You need liability insurance to drive a vehicle, and you need homeowners insurance to qualify for a mortgage. Its primary purpose is to protect you and the bank against the loss of the home. Homeowners insurance also provides you with significant liability protection and is a fundamental component of establishing a good financial position.
Buyers insurance is one of the most important additional coverages you should consider when purchasing a home. Buyers insurance represents a fixed cost that helps protect your budget by eliminating the expense of repairing or replacing fundamental household appliances. Buyers insurance helps keep you on track by reducing the financial impact of appliance failure. It is inexpensive insurance, which makes sense when you are purchasing a previously owned home or when the warranty on your new appliances is set to expire.
If you’d like to find out how you can achieve greater peace of mind with buyers insurance or homeowner’s insurance, contact the friendly professionals at Absolute Choice Insurance today!
South Florida Phone: 305-275-1777
Central Florida Phone: 407-344-4444