A warranty insurance policy on the purchase of a home includes home repairs and replacements due to normal wear and tear, such as appliance breakdowns, furnace and air conditioning malfunctions and electrical system failures. Warranty insurance only covers items that are in working order when homeowners purchase the policy, states Home Warranty of America.
Home warranty coverage varies, depending on whether policies are basic or premium ones, and if they include options for customizing coverage. For instance, some policies offer eco-friendly options, which replace covered equipment with green products that help homeowners save on their energy bills. Some premium policies include coverage on parts that are not typically covered, such as dishwasher racks, baskets, rollers and door seals, according to Home Warranty of America.
When a wear-and-tear breakdown occurs, a homeowner with warranty insurance usually only pays a small fee to have the appliance or system checked and fixed. Home warranties do not pay for items that wear out because of improper maintenance or pre-existing problems, reports Realtor.com. Larger items such as swimming pools and septic systems may need optional coverage. Home owners sometimes purchase warranties if they are selling their homes as an incentive to buyers who are reluctant to purchase older houses.