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Keep yourself up to date with the Northern Virginia Real Estate market and other local Northern Virginia information. Have a question or thinking about buying or selling home call Ritu Desai at Samson Properties at 703-625-4949 or email me at Info@eNOVAHomes.com.

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Home Buyers Guide to -Difference between Home Warrany and Home Insurance
Hello Ritu, We are in processing of purchasing a home. Our Realtor recommended us to purchase a home warranty. Doesn't our home insurance cover us? Why do we have to buy a home warranty? What is the difference between the two?

Answer: What  great questions!! During my initial home buyer consulting I do bring up and explain to my buyers the option they have to purchase a home warranty and the differences. Here are the details:

What is Home warranty?

Home warranty is a yearly service contract that you may purchase when you buy a home. Typically home warranties will cover the repair and replacement of major appliances such as Heating/Cooling system, Water Heater, refrigerator, Dishwasher, Range, Oven etc. Plumbing and electrical system are also covered.  Some companies also cover roof.

What is Home Insurance?

Home insurance also known as Hazard insurance policy is similar to your car insurance. It covers you and your home for any unforeseen catastrophe. Depending on your coverage, the insurance policy may cover
  • Personal property, furniture, clothing, jewelry etc. up to some value
  • Structure and contents of the home.
  • Your living expenses if the home is not in a living condition due to natural disasters.
  • Some appliances may be covered as well.
  • If someone visiting your house gets injured while in your property (slipping on the icy drive way for example) and if you are sued, you are covered by homeowners insurance.
  • It protects you from a variety of events, including fire, lightning, tree-fall, burglary, storms.
  • As a landlord it covers for any vandalism during the vacancy period.
 
Do I have to purchase both home warranty and home insurance when I buy a home?

Home Warranty: No, your lender or anyone part of the transaction does not mandate you to buy a home warranty. It is an optional service contract that you or your seller or Realtor can purchase as a part of your transaction.
Home Insurance: This may be mandated by your lender. You will be required to maintain a home insurance while you owe to the bank. However, if you hold your home free and clear it will be your choice whether you want to purchase and maintain a home insurance policy.

How do I determine if I need home warranty?

Your first step would be to get the home inspected. Decision to purchase the warranty or not is your sole. The variables that many home buyer in Virginia decide whether to purchase or not, depending on ....
  • how much ongoing maintenance the home will need
  • Existing condition of the appliance.
  • How handy you are. If you have your resource to get the work done than you may skip on the warranty.
How do I determine who covers the repairs needed?

Home insurance will cover the costs or repairing the damage and (if necessary) replacing the appliances so long as the policy holder can prove that the damage was due to something that damaged the house as a whole. For example, the insurance company will cover the appliances if the house was damaged in a storm, but it will not cover a dishwasher with a shorted circuit. Some home insurance policies will only cover appliances that are essential to the policy holders' day-to-day lives.

On the other hand the home warranty will cover the cost of repairing and, if the damage is severe enough, replacing any appliance that falls under its coverage. Some home warranties will cover the costs of bringing the appliances up-to-date with the new safety regulations. The home warranty company reserves a right to deny coverage if the appliance was damaged due to improper maintenance, building code violations and or improper installation.

Do I have to pay Deductible?

Yes, both have a deductible that you will owe every time you call and use their service.

What is the Claim process?

Say, when the appliance break down, you must call the home warranty company and explain the situation. The company will then call a home appliance repair provider. The provider will then call the home owner to schedule an appointment and send one of its employees to fix the appliance. The warranty company will cover all the expenses involved in repairs - all the warranty holder has to do is pay a service fee.

Home insurance companies, on the other hand, only cover the costs of repairs - the provider must hire the contractor to make the repairs themselves. However, they may not cover the entire cost. Each insurance company has a limit on how much money it will pay per claim (and, in some cases, per certain period of time). The policy holder would have to cover the rest out of his or her own pocket.

As a landlord/Investor, do I need home warranty?

Many of my investors/landlords have purchased home warranty. Some of them have provided the toll free number to their tenant who can pay and call for the service when needed rather than bothering the landlord. Personally I had home warranty on my investment property. I do not share the warranty information. As a landlord I want to know what happen and what cause the break down. It may be a peace of mind that home investor can purchase.

I bought a new construction home; do I need a warranty and insurance?

Many builders will have the coverage on all major appliances. You do not need to purchase a separate warranty. However your lender as mentioned above will require you to maintain a home insurance policy to cover any major damage to the home.

We are buying a really old home; do I need a warranty and insurance?

Many buyers confuse why they buy a warranty on the first place. Just because age of your home is old cannot be the only reason to have a warranty. Many older homes have been renovated and updated may not need warranty coverage. To purchase or not purchase a warranty should be determined on how comfortable you are if the dishwasher breaks down couple days after you move in. Or in middle of winter the furnace stop working.

We are buying a short sale/foreclosure home; can I buy a home warranty?

Yes, many of the home warranty companies will cover the home that you purchase under foreclosure or short sale. They have limitation on what may not cover. But if you are first time home buyer or an experience buyer it will be a peace of mind for a small feel to purchase a home warranty on a short sale or foreclosure home in Virginia.

What companies are best to get the coverage from for both my home warranty and home insurance?

There are number of companies that offer home warranty and with different level of coverage. To compare the option best person would be to speak to your local Realtor. Read through the fine print of what is not covered.

In regards to your home insurance,  many home buyers start by making a call to their current car insurance company. Referral from friends, your financial adviser, attorneys would be a good resource to learn and under how to buy home insurance.

Is my policy transferable?

Good news on home warranty, many of the companies will let you transfer your remaining time to the new buyers.
However home insurance is tied to your social security and your credit. So you cannot transfer it.

Ritu as a Realtor, what is your professional opinion about the home warranty?

I personally tell my buyers if you are not very handy and/or don't have time and resource to keep up the biggest investment in your home purchase a home warranty. Keep it for the first year and if you think you can maintain the home don't renew the policy. As all of us know everything in real estate is negotiable. Negotiate a home warranty as a part of your home purchase and let seller pay for it.

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