Unlike Homeowners or Renters insurance which covers specified "Damage" to your property, Home Warranty Insurance covers specified "Repairs" which may later need to be made to your property. Each policy will specify which types of repairs are insured and what the Policy Limits and Deductibles are. Most Home Warranties cover Air Conditioning Units, Central Heating Units, Ductwork, Electrical Systems, Plumbing Systems, Water Heaters, Faucets, and Major Appliances, though coverage can vary from state to state and policy to policy. These policies usually require you to call the issuer's service department to place an order for a repair and they will then send their repair contractor to actually do the repair work. There may be "Optional Coverage Choices" offered by the insurer or a choice between a "Standard" policy or a "Premium" Policy. In some cases these policies may be unavailable or certain items may be excluded from coverage due to the age, condition, location, or nature of the property involved or an Inspectors Certificate that the items are currently functional may be required before a Warranty Contract can be issued. Generally, these policies can be purchased by either the Buyer or the Seller in a sale transaction or a property owner may simply want to purchase a warranty policy unrelated to a sales transaction.
For a Home Buyer these policies can serve to reduce the uncertainty in budgeting the Total Cost of Home Ownership, by reducing the degree of any error factor involved in estimating the future repair cost to the home. Additionally, a Warranty can simply serve to reduce any anxiety the Buyer may have about buying a Resale Home. New Home Builders talk a lot about their warranties just for this reason.
From the Home Sellers point of view, these policies can be purchased by Sellers and offered to the Buyer as a Marketing Incentive. A warranty of some kind often makes a Buyer Of Any Product Feel More Comfortable with a deal. Why do you think New Home Builders, Automobile Manufacturers, and Appliance Manufacturers All Talk so much about their warranties? Buyers do not close deals if they are not "Comfortable". These policies can also reduce the potential for "Post Sale" conflict between the Buyer and Seller, since if something which breaks is repaired by the warranty, there is no need for the Buyer and Seller to be involved in determining whether the Seller had Warranted it. Particularly in cases where the Seller desires to sell The Home "As Is", simply to avoid any such "Post Sale" conflicts with the Buyer, these policies can serve to increase the Buyers Comfort level with that type of deal.
Sellers can also potentially benefit from "Pre-Sale" coverage. In most cases if a Seller orders a Policy to Offer the Buyer at closing, and normally the policy is paid for at closing, The Seller can also be afforded the same or in some cases partial coverage during the period prior to closing while the Home Is Actively Listed For Sale (normally up to a maximum of 180 days). This is normally available to the Seller whether the Home Is Listed with a Realtor or Listed for Sale By Owner. In some cases this additional "Pre-Sale" coverage for the Seller is Without Additional Cost, in some cases there is an additional charge.
In every case, be sure to fully read and understand all the options offered and the warranty contract itself, so you understand the options and fully understand what coverage you wish to select and what coverage you are actually receiving.
All coverage is subject to the specific terms, conditions and provisions of the Warranty Contract you will receive if you order a Home Warranty.