What do builder warranties cover?

When you sign a contract for a newly-built home, the developer or builder usually offers a builder warranty. While the warranty provides some coverage for a certain period of time, it isn’t enough to safeguard you from every possible issue with the home, and it doesn’t provide the same protections as homeowners insurance.

If you’re in the market for new construction — either a house you build, a spec house or any other never-owned property — here’s what to know about builder  warranties.

What is a builder home warranty?

A builder’s home warranty (aka a builder’s warranty, builders warranty or builder warranty) is exactly what it sounds like: a warranty from the builder that covers workmanship and other aspects of the home’s construction for a limited time, usually one to two years for some areas of the home and 10 years for major structural components.

Often, the builder purchases the warranty from a third-party provider on your behalf. If anything covered by the warranty fails during the coverage period, the builder might repair or replace it, or directly reimburse you for the cost of repair or replacement. Unfortunately, the choice to repair, replace or reimburse you is often the builder’s or provider’s — not yours.

What does a builder warranty cover?

Many builder warranties include language indicating the warranty covers “materials”, “systems” and “workmanship.” This includes defects in the home’s structure, such as the foundation, a load-bearing wall or the roof. This might also include electrical, mechanical and plumbing systems.

The builder warranty generally doesn’t include appliances — these are already covered by the appliance manufacturer or by a home warranty (see below). It also generally doesn’t include landscaping, including fencing and retaining walls, nor outbuildings or structures like a deck, porch or shed.

If you’re not sure what your builder warranty does and doesn’t cover, refer to the “Exclusions” listed in your contract. There’ll be many.

Are builders required to provide a warranty?

Most new-construction homes come warranted against covered defects, and some states mandate that builders provide these warranties. If you’re buying the home with an FHA or VA loan, your builder is required to provide a warranty.

How long is a builder warranty good for?

Builders warranties don’t last long — typically one year or two, although some warranties come with 10-year coverage.

After the builder warranty expires, your only form of coverage is your homeowners insurance policy. If you purchased a home warranty, it might offer some protection, as well.

Builder warranty vs. home warranty

A home warranty is an optional plan some homebuyers purchase when they move into a new place. It functions similar to a builder warranty in that it covers some home systems for a set amount of time.  But it usually covers major appliances and mechanical fixtures, not structural components.

Also, unlike a builder warranty, you’ll need to pay for a home warranty out of pocket. If you’re working with a real estate agent, they might offer to pay for this coverage as a closing gift.

While a home warranty can come in handy for an existing or older home, it isn’t always worth the cost. A builder warranty, on the other hand, is a must-have — you’ll want at least some assurance that the home was safely constructed.

Some states are tougher on enforcement of builder warranties than others. That’s why it’s wise to check with your state’s Attorney General Office or contractor licensing board to make sure the builder is offering all warranties required by state law.

What voids a builder warranty?

If you take it upon yourself to complete repairs or replace a defective item or system — by buying your own materials or hiring your own contractor, say — you won’t be able to make a claim with the builder or warranty provider. While it can be tempting to take matters into your own hands, especially in an emergency situation, make a claim first. If you don’t, you won’t be reimbursed, even if the repair would’ve been covered by the warranty.

Likewise, the warranty doesn’t give you license to neglect your home or misuse its systems. If you fail to keep up with maintenance and a covered item fails as a result, for example, you won’t be able to make a claim.

Builder warranty questions

Before you move into your new home, make sure you complete a thorough “punch list” during your final walk-through with your builder, clearly designating the items for which the builder is responsible under warranty.

Here are a few other key questions to ask of the builder (and yourself) about your warranty:

• What isn’t covered?
• Who exactly do I contact if I have a claim or problem?
• What’s the extent of your liability?

Bottom line on builder warranties

When you buy a new-construction home, you’ll most likely get a builder warranty that covers the home’s structure and workmanship. This coverage can last up to 10 years. It isn’t the same as your homeowners insurance policy, however, nor the same as an optional home warranty. Carefully review the builder warranty contract to understand what is and isn’t covered, and for how long.