A home warranty for a new home is a contract that covers certain types of home repairs. Builders often provide warranties for new homes, and new home sellers might provide them as buyer incentives. Homeowners can also buy a home warranty for themselves.
What does a builder’s warranty cover?
A builder’s warranty is a warranty on new construction and sometimes remodeling work. Generally, the builder of a new construction home is going to vouch for their work via a warranty for the new home. These warranties often last between six months and two years.
What’s usually covered
Typically it’s workmanship, installation and construction processes, and materials, such as the framing, concrete floors, windows or paint.
What’s usually not covered
A builder’s home warranty for a new home typically doesn’t cover appliances, such as the dishwasher or stove. You may be able to buy coverage for appliances and other items with a separate home warranty.
What to know
Before you commit to a home builder, ask what the builder’s warranty covers and for how long.
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Home builder’s warranty vs. regular home warranty vs. home buyer’s warranty
The main differences between a home builder’s warranty, a regular home warranty and a new home buyer’s warranty are who provides the warranty, what is covered and for how long.
- Builder’s warranty: A builder's warranty for a new home usually is provided by the construction company to cover defects in workmanship and materials, often for six months to two years.
- Home warranty: A home warranty is a service contract under which you agree to pay a monthly or annual fee in return for future repairs or replacement of certain covered items for specific reasons. Typically you also agree to pay a flat fee for service calls.
- New home buyer’s warranty: This term typically refers to a home warranty that is included in a real estate contract, usually as an incentive. Who pays for the home buyer’s warranty depends on the real estate contract.
Although some home warranty companies earn a strong reputation and effectively defray the costs of the repairs they cover, other companies make the process cumbersome or cost-intensive. For instance, consumer complaints arise against service contract providers for some of the following:
- Opaque or work-intensive processes for scheduling service calls and getting repairs.
- Limitations on who can perform the repairs or what brands of product will be used, which may result in lower quality workmanship, with limited recourse for additional repairs.
- Claim caps, meaning some warranty companies only pay a flat amount for a repair or replacement, even if what you need is much more expensive.
- Fine print, such as requirements to use private arbitration rather than going to court if there is a conflict.
🤓 Nerdy Tip
If you buy a new home, layering a home warranty on top of a builder’s warranty can provide additional security if you’re worried that something expensive might break. However, the often limited coverage home warranties provide makes it important to weigh whether you may come out ahead by putting the money you would normally spend on the warranty premium into a bank account for future repairs instead. What to know before buying a home warranty
Reading the coverage and exclusions information in your contract is one of the most impactful things you can do to avoid costly misunderstandings in the future. You have a right to read your contract before purchasing a plan, and it’s important to understand that home warranties:
- Always have exclusions to coverage, no matter what their sales pitches say. Read your contract carefully before purchasing a plan — especially anything listed as an exclusion or limit of liability. For example, a company might cover air conditioning systems but exclude certain parts or components, such as coils. Other companies cover plumbing repairs but won’t pay to clear all plumbing stoppages or repair certain types of leaks.
- Are not a type of insurance. Even though some companies call their service fees deductibles, home warranties do not work the same way as insurance policies. They differ in what they cover and how they pay for repairs or replacements. A home warranty is not a supplement for homeowners insurance.
- Limit how much they pay. If the cost of a repair or replacement goes beyond a limit stated in your contract, you’ll have to pay the difference. For example, if the bill for a repair is $2,000 and the limit is $1,500, you’re required to cover $500. This is in addition to your monthly premium and service fee.
- Can deny your claim for several reasons. Examples include if you had work performed on a covered item without approval or you modified the system or appliance.
- May not pay enough to cover the full cost of replacing a covered item. Home warranties often depreciate the value of items as they age, so you’ll likely have to pay at least some money to replace an item, even if it’s covered by the contract.
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- 1. Federal Trade Commission. Warranties for New Homes. Accessed Nov 25, 2024.
- 2. Office of the Attorney General for the District of Columbia. Consumer Alert: Home Warranties. Accessed Nov 25, 2024.
