What Is A Home Warranty? What Kind Of Home Warranty Can I Get For A New Construction As Opposed To A Previously Owned Home?
Buying a home is one of the biggest expenses a person will purchase. And to ensure that the home is protected, many new homeowners are protecting their homes and appliances with a home warranty.
In this article, we will take a look at home warranties, covering the basics and address common questions about how your new home is covered under most common warranty coverage plans.
What is a Home Warranty?
A home warranty is a contract that enables buyers of a new property to have certain parts of the house replaced or repaired if they should be damaged during a predetermined time frame.
Typically, home warranties protect a home’s appliances, plumbing, electrical, and HVAC systems after a property has been sold to a new owner. Additional coverages can be purchased or added to a purchase deal to include other parts of the home, including the roof, swimming pools, hot tubs, and so forth. Warranties also define how repairs will be made, including coverage for workmanship and materials on most components.
Another key point about home warranties is that coverage is not uniform in time length. For example, a newly constructed home will have a one-year coverage policy for the exterior of the home (stucco, siding, etc.) as well as drywall, trim, doors, and hardware. Coverage for plumbing, electrical, and HVAC systems is generally covered for two-years. Some home builders will provide warranty coverage for up to ten years for major structural defects - which includes the roofing, flooring, supports, and more.
When are Home Warranties Issued?
A home warranty is usually provided during a real estate transaction between the buyer and a seller, but it also can be added at any time during homeownership. Sellers may offer a warranty as a guarantee to incentivize buyers. Buyers may also purchase a warranty after purchasing the home (and can be offered a discount if it is purchased within 30 days or so after closing). And a title company may require a home warranty to finalize a sale
Many companies specialize in offering home warranties, even for older homes. Typically, a home inspector will review the property and assess what the home can be issued as a warranty (such as qualifying appliances, structural issues, etc.). The advantage of purchasing a home warranty is that it won’t affect tapping into homeowners insurance (see next section). How is a Home Warranty Different than Homeowners Insurance?
A home warranty provides similar coverage to homeowners insurance, but there are a few differences that make it a more appealing coverage to have:
- A home warranty typically doesn’t require a deductible to initiate coverage.
- By using your home warranty to replace parts of your home, you can avoid tapping into your homeowners insurance, which may raise premiums if used repeatedly.
- A home warranty only provides coverage for a predetermined amount of time; once that expires, insurance is usually the next step for covering a home and its contents.
- Not all homes come with home warranties, but most homes – especially those with a mortgage - are usually encouraged to have homeowners insurance in place to mitigate risk in the event of damage to a home (ex. a washing machine catches on fire).
- Home warranties usually have set caps on how much you can claim during the warranty period. Homeowners insurance, on the other hand, can cover the basics or it can be expanded with more covered perils (i.e. flood insurance).
What Kind Of Home Warranty Can I Get for a New Construction As Opposed to a Previously Owned Home?
Home warranties for new construction homes are typically included to reassure buyers of their quality and to address any defects that may occur over time. Many warranties for new homes are backed by the builder, but there are also builders that purchase these warranties from an independent company. That’s why it is important to review the warranty with a builder before committing to a purchase. If the property doesn’t have an extensive warranty, you may want to look elsewhere for a property or insure the property independently.
It should be noted that newly-built homes with warranties usually don’t cover expenses that an owner may incur due to independent construction on the property, household appliances (they usually come with their own warranty), and other items which are usually detailed in the warranty’s fine print.