Category: insurance

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What’s a Home Warranty and Why Do You Need One?

To be a homeowner is to understand that things can change at a moment’s notice. It’s only a matter of time before the systems in your home break and your appliances are on the fritz. But this inevitable truth isn’t meant to be all doom and gloom. Fortunately, you can protect yourself against these events with a home warranty.

What is a home warranty?

A home warranty and homeowners insurance both protect homeowners against unexpected events. A standard homeowners insurance policy typically covers your home, your belongings, injury, or property damage to others, and living expenses if you are unable to live in your home temporarily because of an insured disaster.

The policy likely pays to repair or rebuild your home if it is damaged or destroyed by disasters, such as wildfires, a winter storm, or lightning. Your belongings, such as furniture and clothing, are also insured against these types of disasters, as well as theft. Some risks, such as your home flooding, are routinely excluded from homeowners insurance policies.

A home warranty picks up where homeowners insurance leaves off by covering some or all of your HVAC, electrical systems, plumbing, and major appliances. A home warranty contract pays for the repair costs associated with these household items. However, if something in your home has not been properly maintained, your home warranty likely won’t cover it. Clarify the specifics of your policy’s language regarding proper maintenance with your warranty provider to avoid potential disagreements. Most home warranties are good for one year with the ability to renew annually.

What does a home warranty cover?

Home warranty policies vary by provider and location. Different coverages offer different protections among your home’s systems and appliances, or a combination of the two. Fees vary as well, based on your plan’s coverages and applicable service fees.

 

Image Source: Getty Images – Image Credit: PeopleImages

 

Why do you need a home warranty?

Home warranties have several benefits both for buyers and sellers. For buyers, you can rest assured that your appliances are covered if and when they break down. This saves you from unexpected repair bills from having to hire a contractor. And when selling your home, a home warranty can serve as a way to differentiate your property over other listings. When buyers know a home is protected with a warranty, they can buy with confidence.

Finding the Right Home Warranty

As with anything in the home buying or selling process, it’s important to shop around when searching for the right home warranty policy. During your discovery process, ask questions about the policy’s costs, its dollar amount limit, which items it covers, and its applicable fees including service calls. Talk to your agent about trusted warranty providers in your area.

For more information on protecting your home, visit the Living section on our blog:

Windermere Blog – Living

 

­­­­­­Featured Image Source: Getty Images – Image Credit: Pekic

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The Importance of Homeowners Insurance

In addition to providing shelter and comfort, our home is often our single greatest asset, and it’s important that we protect that precious investment. Most homeowners realize the importance of homeowners insurance in safeguarding the value of a home. However, what they may not know is that about two-thirds of all homeowners are under-insured.

 

What a Standard Homeowners Policy Covers

A standard homeowners insurance policy typically covers your home, your belongings, injury or property damage to others, and living expenses if you are unable to live in your home temporarily because of an insured disaster.

The policy likely pays to repair or rebuild your home if it is damaged or destroyed by disasters, such as wildfires, a winter storm, or lightning. Your belongings, such as furniture and clothing, are also insured against these types of disasters, as well as theft.

Some risks, such as flooding or acts of war, are routinely excluded from homeowner policies. Special coverage is needed to protect against these incidents. Your insurance company can let you know if your area is flood or earthquake prone. The cost of coverage depends on your home’s location and corresponding risk.

Other coverage in a standard homeowners policy typically helps cover the legal costs for injury or property damage caused to other people. For example, if someone is injured on your property and decides to sue, the insurance would cover the cost of defending you in court and any damages you may have to pay. Policies also provide medical coverage in the event someone other than your family is injured in your home. If your home is seriously damaged and needs to be rebuilt, a standard policy will usually cover hotel bills, restaurant meals and other living expenses incurred while you are temporarily relocated.

Keep in mind that homeowners insurance policies provide coverage for the owner(s) living in the home. If you plan on renting out your home, you’ll need to purchase landlord insurance in addition to your homeowners policy.

 

How Much Insurance Do You Need?

Homeowners should review their policy each year to make sure they have sufficient coverage for their home. The three questions to ask yourself are:

  • Do I have enough insurance to protect my assets?
  • Do I have enough insurance to rebuild my home?
  • Do I have enough insurance to replace all my possessions?

Here’s some more information that will help you determine how much insurance is enough to meet your needs and ensure that your home is sufficiently protected.

 

Protect Your Assets

Make sure you have enough liability insurance to protect your assets in case of a lawsuit due to injury or property damage. Most homeowners insurance policies provide a minimum of $100,000 worth of liability coverage. With the increasingly higher costs of litigation and monetary compensation, many homeowners now purchase $300,000 or more in liability protection. If that sounds like a lot, consider that even a dog bite claim can easily be tens of thousands of dollars. Talk with your insurance agent about the best coverage for your situation.

 

Rebuild Your Home

You need enough insurance to finance the cost of rebuilding your home at current construction costs, which vary by area. Don’t confuse the amount of coverage you need with the market value of your home. You’re not insuring the land your home is built on, which makes up a significant portion of the overall value of your property.

The average policy is designed to cover the cost of rebuilding your home using today’s standard building materials and techniques. If you have an unusual, historical or custom-built home, you may want to contact a specialty insurer to ensure that you have sufficient coverage to replicate any special architectural elements. Those with older homes should consider additions to the policy that pay the cost of rebuilding their home to meet new building codes. Finally, if you’ve done any recent remodeling, make sure your insurance reflects the increased value of your home.

 

Replacing Your Valuables

If something happens to your home, chances are the items inside will be damaged or destroyed as well. Your coverage depends on the type of policy you have. A cost value policy pays the cost to replace your belongings minus depreciation. A replacement cost policy reimburses you for the cost to replace the items.

There are limits on the losses that can be claimed for expensive items, such as artwork, jewelry, and collectibles. You can get additional coverage for these types of items by purchasing supplemental premiums.

To determine if you have enough insurance, you need to have a good handle on the value of your personal items. Create a detailed home inventory file that keeps track of the items in your home and the cost to replace them.

 

Create a Home Inventory File

It takes time to inventory your possessions, but it’s time well spent. This extra preparation also helps to keep your mind at ease.  The best method for creating a home inventory list is to go through each room individually and record the items of significant value. You can also sweep through each room with a video or digital camera and document each of your belongings. Your home inventory file should include the following:

  • Item description and quantity
  • Manufacturer or brand name
  • Serial number or model number
  • Where the item was purchased
  • Receipt or other proof of purchase / photocopies of any appraisals—along with the name and address of the appraiser
  • Date of purchase (or age)
  • Current value
  • Replacement cost

Pay special attention to highly valuable items such as electronics, artwork, jewelry, and collectibles. Simple inventory lists are available online.

 

Storing Your Home Inventory List

Make sure your inventory list and images are safely stored in case your home is damaged or destroyed. Keep them in a safe deposit box, at the home of a friend or relative, or on an online storage site. Some insurance companies provide online storage for digital files. (Storing them on your home computer does you no good if your computer is stolen or damaged.) Once your inventory file is set up, be sure to update it as you make new purchases.

We invest a lot in our homes, so it’s important we take the necessary measures to safeguard against financial and emotional loss in the wake of a disaster. Homeowners insurance is that safeguard. Be sure you’re properly covered.

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What Is Landlord Insurance and Why Do You Need It?

If you are a landlord, it’s important to take steps to properly protect yourself and your property before the renters move in. Landlord insurance helps fill in the gaps of coverage where homeowners insurance policies don’t apply and allows you to rest easy knowing your home is sufficiently covered while tenants occupy your property.

 

What is Landlord Insurance?

While homeowners insurance provides coverage for a home occupied by its owner(s), landlord insurance covers properties that are rented to short-term guests or long-term renters. If you plan on renting out a room while you stay in the home, your homeowners insurance policy may offer coverage, but it depends on factors like the number of renters and the length of their rental agreement(s), so check your policy first.

A typical landlord insurance policy will cover the following:

Property Damage

Property damage insurance ensures your home is protected against damage caused by natural disasters, fire, electrical mishaps, and more while your home is being rented. This typically covers the home itself, any detached structures on the rental property such as ADUs or garages, and any personal property you use to maintain the home.

 

Liability

If a renter or visitor suffers an injury on your property, your landlord insurance will help cover their medical costs and, if legal action is taken, legal costs. Liability costs can snowball quickly, and it’s important to have coverage in place to protect yourself from having to pay out a lump sum for hospital bills or a settlement. For example, if a renter steps through a floorboard while walking on the deck and hurts their leg, a court may decide that a lack of property maintenance was the cause of the injury, thus leaving you responsible. However unlikely the scenario may seem, having coverage in place is better than the alternative.

 

Rental Income Loss

Homes are prone to accidents and issues that can render them uninhabitable. If this happens at your rental, you won’t see rental income until the problem has been fixed. Most policies provide reimbursement for lost income during a time when you’re unable to rent out the property, as long the cause of the underlying issue is covered. For example—if you live in a climate that’s conducive to mold growth, a rapid spread of mold could put a halt on renting your property. Accordingly, you’d want to make sure your policy provides adequate coverage against damage caused by mold.

 

Why Do You Need Landlord Insurance?

In short, renting out your property and having landlord insurance go hand-in-hand. Because homeowners insurance is unlikely to provide sufficient coverage for your rental, you’ll need a separate policy that covers you specifically as a landlord. When shopping around for landlord insurance, make comparisons based on the needs of your rental property. For instance, if you have separate dwellings on the property, prioritize additional structures coverage when looking at different policies. If you’re looking to bundle your landlord insurance with your existing coverage, keep an eye out for bundling discounts.

 

For more information on managing your rental, read our article on how to Give Your Rental A Competitive Advantage.

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